Tyco Reports Earnings, Makes Organizational Moves


Tyco says it has recovered from a large loss in 2002 and took in a net profit for its 2003 fiscal year as it reported its quarterly and full-year earnings on Nov. 4. For 2003, Tyco reports earnings of $979.6 million (49 cents per diluted share) compared to a loss of $9.2 billion ($4.62 per share) in 2002.

In its earnings announcement, Tyco also revealed it plans to divest itself of at least 50 of its businesses – half of which will be in the Fire and Security segment. In addition, Tyco also announced a restructuring of its Fire and Security division that will include the release of 5,000 employees.

While saying it isn’t in the best interest of his company to reveal which units of Tyco’s Fire and Security business will be included among the divestitures, Tyco CEO Ed Breen said in a conference call that they are part of Tyco’s plans to focus solely on its operations. “We view these as important steps toward building the foundation we need,” Breen says. “They are designed to increase the focus on our core operations and exiting certain operations that clearly don’t fit in Tyco going forward.”

Tyco would only reveal that among its divestitures would be the sale of the Tyco Global Network (TGN), an undersea fiber-optic communications network. Breen says only four of the more than 50 units to be divested have sales greater than $100 million, but that on the basis of revenue, half of the businesses Tyco plans to let go are in its Fire and Security arm.

Breen also detailed the planned restructuring of Fire and Security he estimates will have an annual savings of $160 million for Tyco. Besides the 5,000 employees who will be losing their jobs, Breen says the restructuring of Fire and Security will include the elimination of 184 facilities, of which 15 are manufacturing. As part of the restructuring, Breen says he sees an acceleration taking place of the ongoing business model changes at ADT Security Services.

“We believe we have a significant opportunity to improve these businesses with restructuring initiatives that have short paybacks,” Breen says of the Fire and Security restructuring. Besides ADT, Tyco’s Fire and Security businesses include CEM Systems, Sensormatic and SimplexGrinnell.

On the earnings front, while announcing a net profit for the year, Tyco says it had a loss of $297.1 million in its 4th quarter, which was much narrower than the $1.4 billion the company lost in the 4th quarter of 2002. Revenues were $9.5 billion for the quarter and $36.9 billion for the year.

Tyco’s Fire and Security businesses had a net profit of $360.2 million for the year, down from the $904.7 million it made in 2002. Fire and Security had a net profit of $133.1 million in the 4th quarter, down from $476.9 million in the 4th quarter of 2002.

Tyco is still recovering from a scandal involving its former chief executives. The company’s former CEO Dennis Kozlowski and CFO Mark Swartz are on trial for allegedly looting the company of $600 million.

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