Swords and Schering-Plough Shares

Editor's note: Adam Feuerstein's columns run exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, please click here.

The market was expecting Fred Hassan to drop the hammer, and Thursday night, the new Schering-Plough (SGP) chief did just that.

Schering-Plough cut its dividend by two-thirds -- to 5.5 cents per share from 17 cents per share Thursday night -- a move widely anticipated by investors as just one step needed to turn around the ailing drugmaker.

Hassan, who took the reins at Schering-Plough in April, also warned that 2004 earnings likely would be lower than current-year profits. And he announced additional "aggressive measures" aimed at stabilizing the company, including deeper spending cuts and the elimination of jobs and executive bonuses and employee profit sharing.

"We will all be making sacrifices as a result of these actions. We remain confident that, by taking these actions, we will set a strong foundation for long-term growth," Hassan said in a statement.

Schering-Plough shares closed Thursday up 24 cents, or 1.5%, at $16.48, and the stock was halted, unchanged, in after-hours trading.

The story at Schering-Plough has long been one of a drugmaker in decline due to weakening product sales. The loss of patent protection on its key allergy drug Claritin, coupled with the launch of generic and over-the-counter versions of the drug, sharply impacted sales.

Before that, Schering-Plough was forced to deal with well-publicized manufacturing problems, and most recently, the company's hepatitis C franchise has come under attack from rival drugmaker Roche. The recent launch of a new cholesterol-fighting drug, Zetia, has been a bright spot, but not enough to compensate for the overall decline in Schering-Plough's drug portfolio.

Since December 2000, Schering-Plough shares have plunged more than 70%.

Even though many of these steps announced Thursday were expected by Wall Street, the timing of the announcement, the way it was handled, and the magnitude of the cuts surprised and angered analysts, some of whom lashed out on an evening conference call.