By cutting costs, Merck
What's its new plan of attack? Cut some more. Merck is planning on cutting 12% of its workforce in the hopes of saving $4 billion through 2013. I'm all for cutting the bloat, but there's a reason why the bloat is there and Merck has had to temper its long-term profit forecast: The sales just aren't materializing.
With the exception of Januvia, which is competing really well with Takeda's Actos and GlaxoSmithKline's
The recent potential offerings from the pipeline seem to have fizzled as well. The Food and Drug Administration turned down its cholesterol-lowering drug Tredaptive/Cordaptive, and Merck has abandoned its anti-obesity drug taranabant.
It's impossible for a company to cut its way to higher growth forever, so investors should be very leery of Merck's long-term plan. It's in a generally recession-resistant industry, but I can't see Merck getting much of a pop as the economy turns around. Fat dividend or not, Merck is going to have to find a way to get more drugs onto the market or get its current offerings growing again before I'll invest.
Here's some better Foolish turnaround ideas:
