Updated from 8:11 a.m. EDT

Baxter International ( BAX) said Thursday that it will continue cutting costs, reducing payroll and consolidating businesses to become more competitive.

The announcement came as the Deerfield, Ill.-based company issued a first-quarter financial report that was essentially in line with the consensus view on Wall Street.

Baxter earned $189 million, or 31 cents, from continuing operations and produced $2.21 billion in revenue for the three months ended March 31.

The consensus opinion of analysts polled by Thomson First Call was for earnings of $203.6, or 31 cents a share, on revenue of $2.15 billion. Baxter said the results met its earnings guidance of 28 cents to 31 cents a share.

For the same period last year, Baxter earned $217 million, or 36 cents a share, from continuing operations, on revenue of $2 billion.

"While organic sales growth was in line with our expectations, we need to take further actions to realign our cost structure in order to drive greater profitability," said Brian P. Anderson, the company's senior vice president and chief operating officer. That means Baxter will be reducing capacity in its blood plasma business and consolidating other activities "in order to drive sustainable improvements in our financial performance," Anderson said.

Apparently, Wall Street thinks Baxter needs to cut more. Baxter's stock was down 67 cents, or 2%, to $33.29 in late-morning trading. The stock dropped as low as $32.50

The company said it plans to undertake several measures, including the dismissal of 3,500 to 4,000 workers -- 7% to 8% of the workforce. Half the job cuts will take place in the United States. Anderson said Baxter also plans to reduce plasma production annually by 13% and close additional plasma collection centers.

Baxter will record an after-tax charge of $350 million to $400 million, or 55 cents to 65 cents a share, in the second quarter, primarily to reflect severance costs and closing of facilities.

Last July, Baxter said it would fire 3,000 workers, reduce plasma production and close 26 plasma collection centers. The company said it has implemented 85% of those cost-cutting measures, producing savings of 4 cents a share for 2004's first quarter. Baxter said the latest round of cost cutting could produce savings of 5 cents a share in the second half of 2004, as well as 20 cents to 25 cents next year and 30 cents to 35 cents in 2006.

For the second quarter, the company predicts sales will grow 4% to 6%, excluding the impact of foreign exchange, and that earnings per share from continuing operations would be between 37 cents and 41 cents.

For the full year, Baxter says sales should grow 3% to 5%, excluding the impact of foreign exchange, and that EPS from continuing operations should be in the range of $1.75 to $1.85.

"While cost cutting is likely to become the company's focus in the coming months, it is the overall corporate strategy beyond the launch of Advate that remains a big unknown for Baxter," said Michael Weinstein of J.P. Morgan, in a Thursday note to clients. Advate is Baxter's new genetically engineered blood clotting drug for hemophiliacs.

"Parkinson will certainly have his work cut out for him," said Weinstein, referring to Robert L. Parkinson Jr., the former Abbott Laboratories ( ABT)executive hired earlier this week to become Baxter's chairman and CEO. Parkinson, who officially takes over April 26, succeeds Harry M. Jansen Kraemer, who announced his resignation Jan. 26 and remained with the company during the CEO selection process.

Weinstein, who has a neutral rating on the stock, noted that Baxter had reduced its full-year guidance on Advate sales to the range of $200 million to $300 million, down from its previous guidance of $300 million-plus sales. (Weinstein doesn't own shares; his firm has had an investment banking relationship with Baxter in the last 12 months.)