Why Is Boston Scientific Cutting 1,500 More Jobs?

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Oct. 24 (Bloomberg) -- Boston Scientific plans to eliminate as many as 1,500 more positions as the medical-device industry struggles with shrinking markets and development costs. Olivia Sterns reports on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Numbers, you've got the medical device tax, the potential medical device tax that is putting pressure on the companies.

Is that what the right -- the restructuring has to do with?

I reached out to matt taylor over at barclays and he said the restructuring should be viewed as a positive.

He said it is the latest in a broader restructuring program that boston scientific announced a few years ago.

There is a lot of pressure on this sector right now.

You and i have talked in the past about growing competition.

For example, in 2006, johnson & johnson was the lead maker of stents, but they gave it up after being edged out.

The other pressure is coming from the hospitals that buy these devices.

In the past couple of years, we have seen the power shift from the doctors to the hospitals.

Doctors used to be able to choose which brand of artificial knee or hip or stints they wanted to use.

Now the hospitals go to the manufacturers, they cut the deal, and they tell the device -- the doctors which device to use.

How big a bite will this tax have?

The medical device tax is a flat 2.3% rate tax on sales.

Austin scientific does actually stand to take the biggest bite out of its earnings.

Courting to data from bloomberg industries, boston scientific will see 7.5% white dotted earnings this year.

That is nearly twice the others.

It depends on the portion of sales for these companies in the u.s. and what their profit margins are.

The trouble for boston scientific relative to their rivals is that they have very thin margins.

That is partly why they are going through a restructuring.

And one of the things up for debate has been repealing that law.

Where do we stand on that right now?

Is it still a chance of happening?

Republicans were trying to say that they would reopen the government if they could repeal this tax.

What is interesting is that there is bipartisan support to repeal it.

It is pretty rare that you see an industry get a flat rate tax on sales.

But some analysts have told me that they think the repeal is priced in.

Another who i spoke to at length about this yesterday said she does not think it is that big a deal.

She only expect to see stocks move one percent to two percent on the day.

It is a done deal, unless there is that last-minute repeal.

Thank you.

We will be on the markets again

This text has been automatically generated. It may not be 100% accurate.


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