In an earnings call last week, Medtronic (NYSE:MDT) CEO Omar Ishrak announced he was challenging the medical device maker to cut 25 percent of its costs — up to $1.3 billion — from everything from logistics to sales over the next five years.
This comes as the company wraps up the final year of a cost-reduction plan that CFO Gary Ellis claims shaved $1 billion in expenses over the last five years.
But that’s just the starting point, Ishrak said. The company is working on programs to cut costs long-term so it can maintain profit margins as it penetrates emerging markets that require lower-priced products.
The company generates 60 percent of its overseas revenue from such markets, including Brazil, Russia, China and India, which Ishrak targeted in a September interview with MedCity News as the company’s prime target for international growth.
Major cost cuts could help boost Medtronic, which has struggled with setbacks from its spine products and bone graft products. Overall, profits were flat at $3.1 billion in 2011, but showed signs of improvement in the second quarter of fiscal year 2012. Stocks are down 9.6 percent since the beginning of 2011.