This won't help our http://bitly.com/wow2point3 argument at all.

Very interesting...

uy se vienen mas despedidas.

John Eckberg The average medical device company has as much in common with J&J as a bicycle sprocket maker has with Boeing. Both are in same industry (transportation) but that's it

Andrea Sommavilla Everyday a good new!!!

Maybe it's a result of the Device Tax which prevented them from investing in new product R&D, since it's targeted mostly to device engineering R&D groups this time vs manuf plant layoffs? The result is fewer new products developed, thus lower revenues from devices and the ensuing layoffs as a consequence??

Aaron Liang I think these cuts in the J&J medical device group are a result of flat/declining sales in that division which is a result of a rather mature product line in the affected areas which is facing heavy competition and price wars. It our current environment it would be challenging to raise growth in those mature product groups especially with all of the cost pressures.

The device tax doesn't add any positive incentives but I doubt that a company would restructure its operations in such a manner purely because of a 2.3% excise tax on US sales. At the end of the day companies will do what they think is best to drive profitability and growth. For example, despite not being able to repatriate its foreign earnings due to a convoluted tax system, Apple is investing in new headquarters and staff for future products growth.

Stryker will be doing the same thing within the next 6 months.. They have chosen a different strategy which is to make everyone a 1099 first. That way when they need to start trimming the herd their folks will be that much more expendable.

John Eckberg A 2.3 percent tax on revenues is on average a 30 percent hit to the average company's 2012 earnings. Anybody who doesn't think that is significant is just wrong. Dan Miller raises a great point. R&D started its swoon for most companies in 2010 when the tax was imminent though later delayed. So that's two years to get ready and then two years to pay the tax. It's surprising to me that people have problems understanding how 2.3 percent of the top line confiscates most year-over-year growth in revenues for most companies.

Aaron Liang If taxes were the motivating factor for all decision making, you would expect high margin technology companies such as Apple, Facebook, Google and the rest of Silicon Valley to incorporate in some low tax jurisdiction (e.g. Texas) or stop hiring/investing in California. At the end of the day, taxes are just one factor and if a company feels that it can acquire the best talent to make the most money, they will operate from there regardless of the tax structure. Even when there was uncertainty in the R&D tax credit's status prior to it becoming permanent technology companies continued to spend and invest in R&D. Sure taxes incentives influence decisions but at the end they are just one of many influencing growth and profits and the jurisdictions with the most generous financial incentives don't always generate the most investment or results.

I think your spot on dan... Device
Tax, obama care, trimming the fat amdand ridding itself of under-producing divisions

John Eckberg Crippling...cuts to research....delayed expansion plans...strong words not used lightly, either.

"According to Jennifer Ryan, GlobalData’s Analyst covering Medical Devices, the tax was originally implemented to generate around $30 billion in funds to support the PPACA, under the assumption that greater access to healthcare coverage would create a larger market for medical devices. However, the first half of 2013 saw the tax raising only 60% of the expected amount.

“As well as lacking effectiveness, the tax had many costly consequences for manufacturers, and was particularly crippling to smaller companies, which were forced to face challenges such as layoffs, cuts to research and development efforts, and delayed expansion plans,” Ryan expands. “The tax also threatened to seize much of the money spent on product innovation and advancement in the US medical device market, which was already struggling under stringent regulatory and reimbursement procedures.”

Joe Coughlin Most MAJOR LARGE Healthcare corporations have stated they would not pay this tax so the device manufacturers have just added the extra amount into their pricing. They will collect this levy and show those revs in their audited balance sheet.

John, you're correct. That sums up the current state of the overall failure of the device tax...a truly terrible idea.

Most economists who've weighed in on this issue generally point out that it's bloated and largely unchecked government spending that continues to be the issue. New taxes in any sector are a mute point until spending and rampant special interests are heavily reigned in. Since that's near impossible to expect, it's easier for pet projects like Obamacare to just slap a new tax on American business and cross their fingers that it all works out.

Thanks all for sharing your thoughts!

Nick Di Napoli Jason McGrath,

I have seen cut backs in our division but not a massive push to push sales to only 1099.

That type of infrastructure is definitely market dependent.

Here in Southern California, 1099 is very uncommon in Spine, at least to my knowledge.

Every major company has cutbacks in a regular basis, it's dependent on the economy and business at hand. Over hiring and trimming to filter out the good employees from the great ones.

Corporate America 101 at its finest.

John Eckberg I had a company founder write to me once and he wanted me to stop saying a 2.3 percent tax was a 30 percent surcharge because for his company the amount collected from the tax represented more than 60 percent of his firm's 2012 profit.

I don't think these cuts have anything to do with the Medical Device tax or even obamacare for that matter. The tax has been repealed. J&J and corporations of the same monstrous size cannot function anymore in our society. Businesses that expect to thrive in today's "connection" economy must be nimble, agile and any other word that means the ability to change direction on a dime. 30-40 years ago, it was acceptable to have multiple layers of management. Now, corporate organizational structures are less pyramidal and more fluid. J&J (and others like them) have no choice but to make serious changes to structure and culture. Unfortunately, those changes always seem to be at the cost of good reps and managers.

Michael Cambron J&J claims a $2.0 - $2.4 billion one-time restructuring charge, much more than you would typically expect to spend to cut 3,000 jobs. It also has $37B in cash on hand. I can't imagine this has anything to do with the ACA or medical device tax. If you've not read the J&J Credo I encourage you to do so. I wonder how many publicly traded medical device companies would have the courage to write, live, honor such a Credo today?

http://www.jnj.com/about-jnj/jnj-credo

Salvo Riolo E bravo Alex !!!

Salvo Riolo Alla faccia del Credo....

Feng-Chi Ho A wise leadership who win a battle than so many idiotic soldiers!

First Profit, then....Man: The new J&J Credo. It's No Good!!!!

John Eckberg Hello Feng-Chi Ho - Is that something from the I Ching?

I have shared this news a few days ago based on an article published in a local news paper in Brazil (Estadão). The interesting part is that just beside the article I found another news registering that United, a big american player now present in Brazil thought Amil has increased their revenue in 30%. Less jobs in Medical Devices, more money for health care providers.

John Eckberg, what is your opinion about Biosense-Webster as a device company?