Cardinal Health reorganizes, announces job cuts.

Cardinal Health, Inc. will reorganize operations to create two divisions, Health Care Supply Chain Services and Clinical and Medical Products. The move means the Dublin, OH-based company will slash about 600 jobs, or about 1.5% of its workforce. Not long ago, roughly 18 months, the company had restructured its organization into two units with two segments in each (see Top Companies, page 74).

Cardinal Health's network of pharmaceutical and medical product distribution centers and nuclear pharmacies will form the Healthcare Supply Chain Services segment, led by Vice Chairman George S. Barrett. These businesses provided $80 billion in revenue for fiscal 2007.

The mostly device portion of the company--products for infusion, medication dispensing, respiratory care and infection prevention--will be grouped in the Clinical and Medical Products segment led by Vice Chairman David L. Schlotterbeck. The unit, which supplies hospitals and primary care facilities, is responsible for $5 billion in sales.

As part of the restructuring, Cardinal Health also will separately report results for a group of "other" businesses as a third reporting segment, including Pharmacy Services (outsourced hospital pharmacy management services); Tecomet (orthopedic implants and instruments); Medsystems (enteral devices and airway management products); and Medicine Shoppe International.

Though the businesses "continue to add value," according to the company, Cardinal Health plans to conduct an in-depth review during the next 12 months to evaluate their fit within the new segment structure.

"Through this restructuring, we sharpen our focus on two distinct, large and growing segments of the healthcare industry by aligning our resources, reducing costs and helping to speed decision making for our customers," said R. Kerry Clark, chairman and CEO. "In many ways, these changes formalize the organization we began to put in place 18 months ago and will make us a stronger company that has a greater focus on both our supplier-customers and provider-customers, with a goal of creating more value for shareholders."

The job cuts at the more than 40,000-employee company will result in a $63 million restructuring charge, most of which it expects to recognize in the fiscal year that began July 1. Nearly a quarter of the jobs to be cut are unfilled.

The reorganization comes two months after the company noted fiscal third-quarter weakness in its pharmaceuticals segment. Revenue and earnings has increased at three out of four of its segments. But by far the biggest unit is drugs, and while revenue rose 3.4%, profits fell 21% on lower margins. Cardinal Health said the segment was hurt by "customer disruption" and "slower overall market growth."