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.

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.

One analyst accused Hassan of "hiding" by issuing a late statement but not making a personal appearance on the conference call. A Schering-Plough representative on the call defended Hassan, calling the criticism "unfair," explaining he was not able to be on the call due to a prior commitment.

Hassan, the former CEO at

Pharmacia

, is a highly regarded pharmaceutical executive, so his decision to join Schering-Plough was widely cheered on Wall Street, even with the acknowledgement that he had a tough task ahead of him in trying to turn the drugmaker around.

Thursday's drastic actions send a message to the market that Hassan is taking the turnaround job seriously. The question facing investors now is whether this signals the bottom for Schering-Plough, and more importantly, the beginning of better times ahead for its stock.

James Cramer,

TheStreet.com's

TheStreet Recommends

co-founder and a

RealMoney.com

contributor, has been bullish on Schering-Plough, looking past the current situation to what he believes will be a strong turnaround.

"It's like the movie

Groundhog Day

, this stock. It just goes from bad to worse. Then why am I buying it? Because when

Schering-Plough turns, and it will turn, I will make a ton of money, "

Cramer wrote on Aug. 12. Cramer is long Schering-Plough.

Schering-Plough's dividend cut is the first by a pharmaceutical firm in 20 years. "The previous dividend level is not realistic given the company's reduced revenues, the need to conserve cash and the inherited regulatory and legal issues and the need to invest for future growth," Hassan said in the statement.

Schering-Plough was expected to earn 46 cents in 2003 and 59 cents in 2004, according to Thomson First Call. But Thursday night, the drugmaker warned that 2004 earnings likely would be lower than those in 2003.

In addition, the drugmaker said second-half earnings likely would be lower than those in the first half of the year. The company earned 22 cents per share in the first six months of 2003.

Other actions announced Thursday included:

The company must accelerate and intensify cost-cutting beyond the $200 million in savings target originally announced as a target for 2003.

The company will eliminate bonuses for this year under the company's standard bonus plans. That means Hassan will forego up to $2 million in potential bonuses. Employees won't get any profit-sharing payments for the first time in 47 years. And all routine employee merit raises will be frozen through 2004, except in rare circumstances.

Employees will be encouraged to retire early based on certain criteria. Hassan is seeking the departure of at least 1,000 people out of an eligible group of 2,900 in the U.S. "This is the first phase of a global workforce reduction in all areas of the company," Hassan said.

The company will institute "tight controls" on hiring and "major cutbacks" in travel costs, meeting costs and general expenses. Schering-Plough will sell its corporate jet, close its executive lunch room, and eliminate nonstandard executive health plans.

The warning on 2004 earnings also prompted several analysts to question whether the financial situation at the company was even worse than previously thought, suggesting that a turnaround might take much longer than expected. One key concern is the launch and sales ramp of Zetia, especially now that

AstraZeneca

(AZN) - Get Report

is about to roll out its own cholesterol-lowering drug, Crestor.

"This is not a quick fix," said a Schering-Plough representative on the conference call. "It will take some time."

TheStreet.com Staff Reporter Robert Steyer contributed to this report

Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

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