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.

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