Amid Monday's deluge of layoff announcements, it's hard to tell whether Caterpillar's (NYSE:CAT) drop in earnings or its personnel cuts deserved center stage. Based on the sheer number of people being let go, I'm opting for the latter.

In announcing its quarterly results on Monday, Caterpillar said that it'll cut about 20,000 jobs worldwide. About 12,000 of those affected are Caterpillar employees, while the rest are contractors. For the sake of perspective, that figure compares to a companywide contingent of just less than 113,000 at the end of 2008.

At least among the companies I follow closely, the company's reduction in force is one of the largest yet, significantly larger than competitor CNH Global’s (NYSE:CNH) miniscule "restructuring" of 100 layoffs in November, or Terex's (NYSE:TEX) staffing reductions made public last October.  

From a purely financial perspective, the picture wasn't much brighter at Caterpillar. The company earned $661 million, or $1.08 per share, compared to $975 million, or $1.50 a share, in the fourth quarter a year ago. For those of you keeping track, that's a 28% decline year over year on the net income per share line. For the full year, its revenue was $51.3 billion, up 14% from the 2007 top line.

Looking ahead, Caterpillar's CEO Jim Owens noted that 2009 revenue is expected to come in somewhere between $36 billion and $44 billion. In that range, and with the sizable cuts being made to the company's payroll, along with reductions in SG&A, R&D, and other expenses, he believes that Caterpillar can achieve a profit of about $2.50 per share for the year.

So how should Fools approach this machinery behemoth, which as recently as late August was maintaining that its order book in Asia was so strong that it expected to be sold out there through 2010? 

  • First, I'd combine the new information about Caterpillar's extremely soft fourth quarter with the data we'll receive when fellow equipment maker Deere (NYSE:DE) reports its results in mid-February.
  • Second, given the precipitous decline management expects in Caterpillar's revenue in 2009, I'd be very, very careful about moving into the company's shares with anything less than extremely careful deliberation.  

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Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned. He does, however, welcome your questions and comments. The Fool owns shares of Terex. The Motley Fool has a disclosure policy.