Markets

Up in Smoke: Pfizer Spent $6 Billion Restructuring Since Wyeth Merger

By Jim Edwards

Updated on: August 3, 2010 / 10:24 PM EDT / MoneyWatch

Pfizer (PFE) has spent nearly $6 billion on restructuring costs since its acquisition of Wyeth, according to footnotes in its Q2 2010 earnings report and its annual 10-K disclosure to the SEC. That's a staggering amount of money even for a combined company that generates $50 billion in revenue every year.

Companies generally ask investors to ignore restructuring charges as one-off events. But Pfizer has made so many acquisitions so frequently -- Wyeth, Pharmacia, Warner-Lambert, etc. -- that restructuring costs are almost a permanent feature of its landscape. If the company were able to exercise cost control over its restructuring, in the same way it does for its recurring expenses, even a 10 percent reduction in restructuring costs could have added $600 million to Pfizer's bottom line over the last 18 months.

There's been a human cost, too. Since it began a series of "transformation initiatives" in 2005, the company has laid off 25,700 people. It wants rid of a total of 40,000, the company told the SEC:

From the beginning of our cost-reduction and transformation initiatives in 2005 through December 31, 2009, Employee termination costs represent the expected reduction of the workforce by approximately 40,000 employees, mainly in manufacturing, sales and research; and approximately 25,700 of these employees have been terminated as of December 31, 2009.

In the first half of 2010, Pfizer spent $1.6 billion on its ongoing restructuring with Wyeth. Those costs include employee severance, banking and legal expenses, and asset impairment charges. That came after it spent a total of $4.3 billion on restructuring in 2009. The merger with Wyeth was announced in January of last year.

Wall Street cheered the news: The company's profits and revenue both beat expectations. That profit could have been even higher, Pfizer said, if it hadn't been "partially offset by the expenses associated with the legacy Wyeth operations."

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Image by Flickr user purpleslog, CC.