Bayer
Seemingly in one fell swoop, the company is spinning off its Lanxess chemicals and polymers unit and buying Roche's over-the-counter-drugs business. In the short term, these changes will no doubt be disruptive. The Lanxess business contributed $7.4 billion to the top line in 2003, although it also posted an operating loss as a unit. Meanwhile, Roche OTC's sales were $1.3 billion in 2003 with an operating profit of $215.4 million.
The moves are part of Bayer's effort to improve its profitability and become a more focused company. Even with the changes, though, the company retains its conglomerate model, a strategy that its competitors long ago abandoned to specialization. Sure, the Roche purchase puts it in the same league as GlaxoSmithKline
With so many moving parts, Bayer will remain a tough nut to crack, but at least its business lines have promising growth prospects and strong margins. In addition, the company seems to be concentrating most heavily on its health care side, spending more than half its research and development dollars there. The expenditures appear to be paying off -- the company is currently conducting Phase III trials for an oral anti-cancer drug with Onyx Pharmaceuticals
Bayer still does not have the focus of its competitors and will remain vulnerable to cyclical shocks arising from seasonality in its CropScience line and raw materials costs in its MaterialScience area. But the company is more focused than it has ever been, and that may garner it some reward over time.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
