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Applied Biosystems Reorganizes into Four Divisions; SNP Assays, Genotyping Unaffected


Applied Biosystems will be reorganizing its genotyping, SNP assay, and other sequencing operations under the rubric of a new division, molecular biology, which will also encompass RT-PCR, microarrays, and DNA synthesis, the company said in a filing with the US Securities and Exchange Commission July 13.

These moves are part of a larger reorganization in which the company is creating four new business divisions. ABI is also laying off about 145 staff this quarter.

The interim president of the Molecular Biology division will be Catherine Burzik, who joined ABI as executive vice president in August 2003 after serving as president of Johnson & Johnson subsidiary Ortho-Clinical Diagnostics. Burzik, to whom all the divisional vice presidents will report, will run the division until she hires a permanent division head, the company said.

This new organization does not immediately affect the availability of any genotyping- or SNP- related products or services, according to the company. The reorganization will instead “enhance customer focus and service,” said a company spokeswoman.

In addition to molecular biology, the other new divisions will be proteomics and small molecules, led by Laura Lauman, who has managed these products since 2002; Applied Markets, including forensics and other human identification, as well as biosecurity, food and agriculture, and environment, which will be led by Mark Stevenson, formerly vice president and general manager of Applied Biosystems Japan; and Service, which will include the Laboratory Information Management System and will be led by Mike Schneider, who has overseen LIMS service for the company since February.

The new divisional structure and layoffs are the first actions taken by the company pursuant to recommendations made by an outside consultant who has been conducting a review at the company for the past two quarters. Tony White, CEO of ABI parent Applera, first announced last December that the company had retained this strategic consultant to conduct an “in-depth review” of ABI’s product portfolio. This announcement followed on White’s characterization of the company’s fiscal first quarter revenues (for the quarter ended Sept. 30, 2003) as “disappointing.” In that quarter the company’s revenues slid $13.2 million, or 3.3 percent, compared to the same quarter of 2002. Later, in the company’s second quarter conference call, White said the review was not a cost-cutting exercise.

The company has remained profitable over the past year, and has recorded year-over-year increases in net revenues and income in the past two quarters. Sales in the SDS and other applied genomics product area, which has included genotyping and SNP assay products, have increased steadily year-over year. But sales in certain product areas, including sequencing and mass spectrometry have slumped at different times.

In recent quarters, the company has also felt the heat of new competition. Not only has it willingly entered into one of the most competitive areas — microarrays — with its whole genome expression array product, the company has also had to adjust to being a smaller fish in a bigger pond, with General Electric’s entry into the field through its acquisition of Amersham in April.

Last October, when asked whether GE’s entry into the field had changed the competitive picture, White refused to speculate directly, but noted that the company does share one important value with GE. “We don’t like underperforming businesses either.”

This corporate trait is likely what fueled the reorganization.

Up until now, ABI has been divided into departments focused on specific areas, such as sales and marketing, research and development, and administration. Now, each division will be run mainly as a separate business.

“The intention is to provide the new business divisions with the focused resources, decision author-ity, and accountability that we believe they need to drive business planning and performance,” the company said in the SEC filing, adding that certain “cross-divisional functions” including a shared commercial operations organization that will develop sales and marketing tools for each division’s marketing department.

In addition to these four divisions, the company has also created an Advanced Research and Technology unit which is a new technology incubator. Under the company’s new organizational structure, this fifth business unit will explore ventures into “underserved markets,” the company said.

The restructuring, according to the SEC filing, is expected to be substantially phased in by the end of the current fiscal quarter (Sept. 30).

A majority of the layoffs —which constitute about 3.5 percent of its 4,400-person workforce and commenced with the July 1 start of ABI’s fiscal year 2005, — are in R&D, with additional jobs being cut in areas such as sales, manufacturing, and product management, the company said. ABI also said that its Foster City, Calif. headquarters location would be most affected.

The company will field questions on this new divisional structure during its end-of-year conference call July 28, following the release of its fourth-quarter and year-end financial results.


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