Medtronic cutting 500 jobs in Minnesota, 2,000 total
Fridley-based Medtronic is eliminating 2,000 jobs worldwide including about 500 positions in Minnesota.
The medical device manufacturer announced the job cuts during a conference call Tuesday, May 21, to discuss fourth-quarter earnings results.
About half the worldwide cuts are hitting the company’s workforce in the United States, said Gary Ellis, the company’s chief financial officer. Many cuts in the U.S. and around the world are related to consolidation in manufacturing, Ellis added during the conference call.
Cindy Resman, a Medtronic spokeswoman, wrote in an email that about two-thirds of the reductions already have taken place. The company is offering severance and out-placement services to affected employees, she wrote this morning.
The goal of the restructuring announced Tuesday is to “align people to where the growth opportunities are,” said Omar Ishrak, the company’s chief executive officer, during an interview. He added: “There are instances where we can consolidate manufacturing facilities and leverage the scale of a bigger facility for reduced cost.”
Medtronic is one of the world’s largest medical-device manufacturers, and the largest based in Minnesota, where it employs about 8,000 people.
But Medtronic continues to struggle with slow growth in two of its largest product areas — heart rhythm devices and products used in spine surgery. Job cuts are focused on “slow-growing geographies and divisions,” Ishrak told investors during the conference call.
“Some of our businesses such as our spine business and some of our cardiac rhythm business are in end markets that are not growing as rapidly as others,” Ishrak said during an interview. In terms of geography, U.S. and European sales are lagging the growth rate elsewhere.
Medtronic’s division based in Mounds View for heart rhythm devices has been the company’s largest business for decades; it includes pacemakers as well as implantable defibrillators, which shock failing hearts back into rhythm. The heart rhythm business has struggled due to a variety of factors including product recalls, price pressure from hospital customers and questions about whether defibrillators — at a cost of up to $30,000 each — have been overused.
Still, the outlook for the heart rhythm device business is improving, Ishrak said.
“Two years ago, the (heart rhythm device) market was down 10 percent in the U.S. We’re in a state today where we’re discussing whether it’s flat or up,” he said. Minnesota job cuts in the division are “mostly driven by manufacturing facility consolidation,” Ishrak added.
Another large division — the company’s Memphis, Tenn.-based business in spine surgery devices — also has struggled, both from competitive pressures and questions about the safety and effectiveness of a key product called Infuse.
Almost all affected employees in Minnesota were previously notified about the job reductions, said Resman, the company spokeswoman. She added that although Medtronic is eliminating 500 jobs in Minnesota, the company has added 160 positions in the state.
“We also currently have job postings online for around 130 positions in (Minnesota),” she wrote in an email. “We are growing in some areas.”
From a Minnesota perspective, the news for the Fridley-based division for medical device implants to treat neurological conditions is more optimistic because the business is growing at a faster rate. By cutting jobs in slower-growing parts of the company, Medtronic wants to free resources to invest in faster growing areas, Ishrak said, so the division for neurology devices will “probably draw a few more resources.”
The job cuts announced Tuesday are part of a restructuring plan that’s expected to generate $200 million to $225 million in annual savings, said Ellis, the company’s chief financial officer.
During the company’s fourth quarter, which ended April 26, Medtronic reported revenue of $4.46 billion, an increase of 4 percent over $4.39 billion in sales during the same period last year. Profit of $969 million, or 95 cents per share, was down about 2 percent from the year-ago period.
After eliminating one-time costs — including a $154 million charge related to the job cuts — adjusted earnings per share came in at $1.10, which was better than the $1.03 per share expected among analysts surveyed by Thomson Reuters.
“We had a relatively strong finish to a pretty solid year,” Ishrak said of the overall performance. “We need to do this for several quarters over a longer period of time.”
Apparently, investors were pleased. Medtronic shares gained 4.9 percent Tuesday to $52.35.