Osram Licht has announced that it will shed 7,800 jobs over the next two years. At least one analyst has downgraded the company's rating and lowered its target price.
The company has accelerated its plans to cut costs. The downsizing will affect 23% of its workforce. The aim of the restructuring is to reduce the company's annual cost base by €260 million ($348 million) by the end of fiscal 2017.
Osram will cut 1,700 in Germany, many of them in Berlin and Augsburg. The other 6,100 cuts will take place in facilities in the rest of the world. The company has a presence in North America -- Sylvania in the US and operations in Canada and Mexico. The layoffs will hit mostly production workers, with some affected in administration and sales.
"Shares in Osram have lost a quarter of their value over the past six months," Reuters reported on Wednesday, "suggesting there is concern over how much more restructuring may be needed at the company."
The graph to the left shows the stock's progress since March.
An analyst reacts
Jed Dorsheimer, a Canaccord Genuity analyst who follows the solid-state lighting business, wrote yesterday in a report on OSR:
Osram has been a cost-cutting turnaround story of improving profitability. As we near the peak of phase one of its PUSH program, a faster transition has caught the company flat footed temporarily. Until we see evidence of improvement in the SSL business, we cannot become more constructive on the shares.
We believe OSRAM is mispositioned for the transition to SSL. As the company does its best to realign its business units to capture this opportunity, we see further risk.
He downgraded his rating on Osram from buy to hold, and he dropped his target price for the stock from €44 to €35. Dorsheimer also lowered his estimates for annual revenue and earnings per share for 2014 and 2015.
Osram Licht spun off from Siemens and issued a public offering just over a year ago.
— Keith Dawson , Editor-in-Chief, All LED Lighting