Monday, January 26, 2009

More Job Losses

There was a big announcement today as many companies announced job losses due to a declining economy. Home Depot, Sprint, GM, Caterpillar and Pfizer are all planning on slashing jobs.

Of particular interest is Pfizer, who acquired rival Wyeth for $68 billion this weekend and also said it will cut about 8,000 jobs from its current workforce. More cuts are expected once the merger is complete with a few years according to Pfizer management.

One of the main reasons for the acquisition is that Lipitor is worth almost a quarter of Pfizer's total sales and has a looming patent expiry (meaning more competition from generic brands). This is of particular interest to watch as M&A in this environment takes on more of a restructuring and divestiture overtone as cash is tight and companies are looking to improve the bottom line.

Although it could be argued that without a recession, Pfizer would have to have found a solution for its expected decline of it's leading drug one way or another, this seems to also provide additional justification for cutting jobs.

We can expect to see similar types of acquisition activity in the market for several months until earnings begin to pick up.

No comments: