St. Jude Medical (NYSE:STJ) will lay off 450 people by the end of next year as it moves manufacturing of its cardiac rhythm management products from Sweden to Puerto Rico and Malaysia.
The job cuts were prompted by a continued weakness in the CRM market domestically.
“U.S. CRM sales fell into a pot hole,” said Dan Starks, president and CEO of St. Jude Medical, in a conference call with analysts on Wednesday, adding that 28 percent of overall sales comes from the U.S. CRM division.
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U.S. CRM sales were $401 million in the quarter. Last year it stood at $440 million. Of CRM domestic sales, St. Jude was hurt by falling revenue from implanted cardioverter defibrillators (ICDs) , which saw a 9 percent decline to $300 million compared with the second quarter of 2010.
Adding international markets, however, global ICD sales were at $477 million in the quarter ended July 2, a 1 percent increase compared with the second quarter of 2010.
St. Jude Medical and its competitors have all been affected by a slowdown in the U.S. market for ICDs, partly due to a slower economy, but also due to a Department of Justice investigation.
Overall in the quarter ended, the company saw profits decline to $240.9 million, or 72 cents per share, from $254 million, or 77 cents per diluted share. Even as profits fell, revenue jumped 10 percent to $1.45 billion in the second quarter, up from $1.31 billion.
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St. Jude was also forced to reduce its revenue guidance for the CRM division for the second half of 2011. Starks said that he believes that the global CRM market will shrink 2 percent in the second half of the year, and as a result the company’s sales would be reduced by $130 million to $135 million.
Now company officials expect full year revenue from the CRM division will be between $3.06 billion to $3.12 billion. That is lower than the $3.16 billion to $3.25 billion that the company estimated during a conference call in April.
The revised guidance was expected by Morgan Stanley analyst David Lewis, who thought that St. Jude had a too-aggressive guidance in CRM products related to the second half of the year.
