Fool.com: Layoffs Planned at Coca-Cola (Breakfast News) January 26, 2000

BREAKFAST WITH THE FOOL

Wednesday, January 26, 2000

"Success can corrupt; usefulness can only exalt."
-- Dmitri Mitropoulos

Layoffs Planned at Coca-Cola

By Richard McCaffery (TMF Gibson)

Coca-Cola (NYSE: KO), the world's largest soft drink company, plans to announce a restructuring today that could lead to the biggest downsizing in company history, The Wall Street Journal reported.

The layoffs are expected to affect 4,000 or more employees at the company's Atlanta headquarters and overseas operations. The move is part of a plan underway to boost sales and profits at Coke, which hasn't grown its top line in three years.

Weak sales are just the tip of the iceberg. Add to that other recent issues such as antitrust investigations in Europe, sick Belgian schoolchildren, zero marketing zip, and the failure to close the Orangina deal, and it's no wonder Chairman and Chief Executive Douglas Ivestor is being replaced in April by Douglas Daft, Coke's president and chief operating officer.

Analysts had been predicting that Coke would take about a $700 million charge in the fourth quarter to write down underperforming assets overseas, and to reduce its headcount by about 2,000, the Journal reported yesterday. However, the cuts apparently will be wider than expected. A reduction of 4,000 employees amounts to 14% of Coke's workforce and would make it the largest layoff in company history. The layoffs will add about $0.06 per share to the bottom line.

Coke officials are expected to outline the plan today when it releases its fourth-quarter results. Coke's stock closed yesterday up $1 at $65 7/8.

The venerable company needs a shakedown and the incoming Daft looks ready to deliver. With just 2% of the global beverage market, there's plenty of upside for Coke investors.

News to Go

Shares of CDMA chip maker Qualcomm (Nasdaq: QCOM) fell in overnight trading after the company warned that fiscal second-quarter sales may soften due to seasonal factors, components shortages, and a transition to the latest chips. Qualcomm reported fiscal first-quarter sales (excluding charges) of $0.25 per share, up from $0.08 a year ago, and ahead of estimates by a penny.

Manufacturing and technology company 3M (NYSE: MMM) reported fourth-quarter earnings of $444 million, or $1.10 per share, up from $211 million, or $0.86 per share, (excluding non-recurring items) a year ago. The company beat analyst estimates by $0.08 per share, according to First Call/Thomson Financial.

Auto manufacturer Ford (NYSE: F) reported fourth-quarter earnings of $1.8 billion, or $1.47 per share, compared to $1 billion, or $0.84 per share, a year ago. The company beat estimates by two cents per share.

Pharmaceutical company Merck (NYSE: MRK) said fourth-quarter net income jumped 12% to $1.6 billion, or $0.66 per diluted share, compared to $1.4 billion, or $0.58 per diluted share, a year ago. The results were in line with expectations.

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