Updated from 12:35 p.m. EST

Pfizer ( PFE) said Monday it would cut about 10% of its worldwide workforce by the end of 2008 to create "smaller, more focused and accountable operating units."

Pfizer plans to cut its payroll by about 10,000 people, which includes the approximately 2,200 U.S. sales representatives whose jobs were eliminated in late 2006. Pfizer predicts it will save $1.5 billion to $2 billion annually, adding that it plans to reduce its European sales force by more than 20%.

"We must reduce our absolute costs and put in place a more flexible cost structure," said Jeffrey Kindler, the chairman and CEO. "We need to maximize near- and long-term revenues from our current product portfolio, from our pipeline and from external opportunities."

Although payroll cuts had been expected, investors didn't respond warmly to the announcement. By late afternoon, the stock was off 26 cents, or 1%, to $26.96.

The company also issued guidance for the next two years, reiterating that revenue would be flat through 2008 and that sales growth would resume in 2009 and 2010. The sales growth will accelerate thanks to new products and to the lessening effect of generic competition that has hurt the company recently and will continue to do so this year.

Excluding one time items, Pfizer predicts 2007 earnings per share will be $2.18 to $2.25, a 6% to 9% increase over last year. Analysts polled by Thomson First Call predicted an EPS, excluding items, of $2.19.

For 2008, the company forecasts earnings per share, excluding items, of $2.31 to $2.45. The Wall Street consensus is $2.30.

Pfizer issued its restructuring announcement a few hours after it reported narrowly beating Wall Street's earnings estimates for the fourth quarter and 2006 the fiscal year.

Pfizer said it will close manufacturing plants in the New York City borough of Brooklyn and in Omaha, Neb. It will try to sell a plant in Germany as well. The company will close three research facilities in Michigan, two in Ann Arbor and one in Kalamazoo. It also wants to shut a research site in Japan and another in France.

Pfizer has reduced the number of plants to 61 by the end of 2006 vs. 93 in operation by the end of 2003. In addition to the announcement today, the company previously said it would shut 10 other plants. That means Pfizer will have 48 plants by the end of 2008.

Concurrent with plant closings, Pfizer expects to increase the amount of production at non-company sources. Vice Chairman David Shedlarz said 15% of production is conducted by external sources; he said Pfizer will try to double that percentage by 2010.

Pfizer also plans to restructure into "smaller, more focused and entrepreneurial business units that will enhance innovation and draw on the advantages of our scale and resources." The company also said it will cut middle management layers - "at least three to four layers" - in a bid to get nimbler. "By reducing middle management and increasing spans of control, we're getting leaders closer to colleagues and customers," Kindler said.

Pfizer also said it would continue to exploring deals - licensing, collaborations, acquisitions - but it provided few details. "The more we speak of specifics, the more the prices of these deals seem to go up," Shedlarz said.

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