Boston, Nov. 5 (Reuters): Tyco International Ltd on Tuesday said it would eliminate 7,200 jobs, exit more than 50 business lines and sell its undersea fibre-optic cable network as it unwinds parts of the far-flung empire built by former chairman Dennis Kozlowski.
The company also forecast double-digit earnings growth in the current quarter, sending its shares up 7 per cent.
The Bermuda-based conglomerate said it took a charge of $1.2 billion in the fiscal fourth quarter, ended September 30, for the restructuring and divestitures, leaving it with a net loss for the period.
Tyco chairman Edward Breen, hired last year to replace Kozlowski, who is on trial in a Manhattan criminal court on corruption charges, said the moves will accelerate the company’s ability to bolster profits.
The earnings forecast and a $500 million improvement in free cash flow in the fourth quarter sparked investor enthusiasm, said John Boland, an analyst and fund manager at NL Capital Management, which holds an estimated 700,000 Tyco shares.
“It shows that current management has a good handle on the business,” Boland said.
Tyco said the restructuring would include closing 219 manufacturing, sales, distribution and other facilities. The business lines being exited have annual revenue of $2.1 billion, or about 6 per cent of Tyco’s total revenue base. The job cuts represent about 3 per cent of the conglomerate’s workforce of 260,000. Tyco signalled those plans in March at an investor meeting in New York.
Tyco did not specify which business lines it was exiting, besides the undersea network. But it said more than half of the divestitures, as measured by revenue, would come in its fire and security division, which makes sprinklers, burglar alarms and fire extinguishers. In a conference call, Breen promised investors and analysts “solid” results in 2004 but acknowledged a number of problems at Tyco operations that make everything from hospital supplies to burglar alarms.