Eli Lilly Announces Reorg

Eli Lilly (LLY) announced a major reorganization effort today. In an effort to cut costs, the company will organize itself into five different business units. Lilly will also pare back thousands of jobs.
Lilly said that its goal is to cut cost by $1 billion a year and to have 35,000 employees by the end of 2011. That’s a reduction of about 5,500 from today.
I’m not terribly impressed when companies announced cost-cutting initiatives. Shouldn’t they be trying to cut costs all the time? Too often, these announcements are just to put out good sounding press releases. The stock is up a little today so it might be working.
While Lilly’s earnings have been good, last quarter was troubling since it came below the first-quarter’s earnings. The next earnings report may show an earnings drop over the past year. The good news is that the company reiterated its 2009’s EPS guidance of $4.20 to $4.30. Still, Lilly’s performance of late has not won my confidence.

Posted by on September 14th, 2009 at 9:49 am


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