Medtronic to cut 350 Minnesota jobs

Medtronic Inc. said Tuesday it will pare 1,100 jobs around the globe, including about 350 positions in Minnesota -- the largest layoffs initiated by the medical technology giant in at least five years.

The announcement comes as the Fridley-based company tries to reshape itself after growth slowed dramatically for its two biggest businesses: former high-flying operations making devices to repair the spine and also to pace and jump-start the heart.

Although more than a third of the jobs shed over the course of the fiscal year will come from the company's local operations, which employ about 8,000 people, the overall effect of the restructuring is fairly small, just 3 percent of the company's worldwide workforce of 39,500.

"It's always unfortunate to see people turned out of their jobs, but the issue is that Medtronic financially needs to get its cost structure in line," said Phil Nalbone, an analyst with RBC Capital Markets. "This cost-cutting is long overdue."

Medtronic described its efforts as a "realignment" as opposed to a restructuring -- noting that the company will likely hire more workers in businesses that are growing this year than the number being let go in Tuesday's announcement.

"We're growing at a healthy 9 to 11 percent," said Medtronic spokeswoman Marybeth Thorsgaard, noting the realignment will streamline operations and bring efficiency.

The company did not specify which local operations would be affected by the cuts, but analysts said its $4.9 billion cardiac rhythm business, which is based in Mounds View, will likely feel the brunt of the job cuts. Other local operations include its headquarters and neurological business.

Times have been tough lately in the device and drug industries.

Drugmaker Merck & Co. said this week it would cut 1,200 sales representatives as the industry struggles with the lack of new blockbuster drugs, declining insurance payments and generic drug competition.

Last year, Medtronic cut 900 jobs from its automated defibrillator, cardiac rhythm and cardiovascular businesses, with about 80 positions lost in the Twin Cities.

Boston Scientific Corp., which employs about 6,000 locally, pared 2,300 jobs worldwide, although the company never quantified the number of positions cut in Minnesota.

Medtronic's signature Cardiac Rhythm Disease Management business, which makes pacemakers and heart defibrillators, has been bedeviled by a series of industry-wide safety-related recalls. The callbacks began in February 2005 when Medtronic issued a safety advisory for a popular model of defibrillator.

In the spring and summer of 2005, rival Guidant (now part of Boston Scientific) recalled thousands of defibrillators due to safety concerns. Last fall, Medtronic recalled a widely used lead, or insulated wire, that connects the defibrillator to the heart.

The recalls continue to have a snowball effect on sales of the $30,000 devices, according to Timothy Nelson, an analyst with FAF Advisors Inc. Patients and doctors are carefully weighing the risk of sudden cardiac arrest, which defibrillators ward off, against the risk of a recall and possible surgery to remove a faulty device.

"With ongoing quality problems, until you put the last recall behind you by a year or two you're probably not going to make much headway in terms of convincing patients that their quality of life is not going to be affected" by getting the device, Nelson said.

Meanwhile, in recent months, smaller, more nimble, competitors have chipped away share in the spine device market from Medtronic, the market leader, according to Nalbone.

While the spine division's revenue in the fiscal third quarter increased 35 percent to $808 million, the results were skewed by the $4.2 billion acquisition of another spine company called Kyphon Inc. Excluding Kyphon's results, spine revenue grew 11 percent in the quarter.