21 Oct 2003
Lumenis, the Israeli maker of medical lasers, is axing 300 jobs and closing four sites.
In a desperate attempt to save its business, Lumenis, the Israeli maker of medical laser systems, is restructuring and taking an axe to its workforce.
Faced with mounting debts of $210.7 million and falling revenues, the firm has invoked a "turnaround plan" that involves cutting 300 employees (23% of its staff) and shutting four of its facilities.
The sites targeted for closure are Pleasanton and Norwood in the US, Netanya in Israel and Kristianstad, Sweden. Lumenis will also downsize its office in New York and consolidate its R&D operations to three sites in Santa Clara and Salt Lake City in the US and Yokneam in Israel.
The estimated costs of restructuring, $9 million, are to be covered by a loan arranged with an Israeli bank, Bank Hapoalim. The plan will commence immediately and is expected to take about 9 months.
Lumenis says that it is trying to reduce its costs and create a more efficient organization with improved logistics. The proposed scheme involves reducing its levels of management from eight to four and establishing regional sales locations to serve customers in Europe, Americas, Japan and the rest of Asia. Other functions such as R&D, manufacturing, finance, human resources and logistics will be centralized.
The firm admits that problems with its inventory control and logistics in the past have had a negative effect on its business. "Revenue has recently been adversely affected by some of the issues we've had in supplying products and in the logistics area," Kevin Morano, Lumenis's chief financial officer, told analysts during a conference call on the restructuring. "The plan is meant to address not only our cost structure but also the way we operate and function."
The restructuring is not entirely unexpected. At the end of July, Lumenis reported a poor set of second quarter financial results and its new chief executive officer, Avner Raz announced that "significant changes and improvements need to be made to our cost structure and organization".
Revenue has recently slumped and the firm's share price has plummeted from a high of more than $20 in 2001 to a current value of around $2. For the second quarter ended June 30 2003, revenue was $68.1 million, compared with $89.9 million for the same period in 2002.
Much of the damage has come from drop of sales in its aesthetic business which almost halved to reach $22.7 million in the second quarter. Net loss for the period was $33.3 million.
Aside from these poor sales figures and mounting debt another issue of concern to analysts and shareholders is an ongoing SEC investigation into Lumenis's relationships with its distributors between late 1998 and 2002. Lumenis’ third quarter financial results which are due at the end of the month should make interesting reading.