Healthcare products and service provider Cardinal Health Inc. (CAH), said Tuesday that its Clinical and Medical Products unit, which will be spun off later this year, will eliminate more jobs over the next six months as a part of its cost control measures.

The company's Clinical and Medical Products unit plans to reduce its global workforce by about 800 over six months and eliminate an additional 500 positions through normal attrition and not filling open roles. Cardinal Health employed over 47,000 people as of June last.

Dublin, Ohio-based Cardinal Health said it would also implement cost control measures and additional reductions in discretionary spending across all of its businesses, in response to a delay in hospital capital spending and the overall decline in the global economy.

In connection with the workforce reduction, the company expects to incur a restructuring charge of about $33 million for the remainder of fiscal year 2009 and an additional charge of about $24 million in fiscal year 2010. The company expects to save about $110 million to $130 million within two years from the workforce reduction.

The tough economy has forced many hospitals to reduce spending on equipment purchases. The impact of weaker macroeconomic conditions, tightened credit environment, and lower admissions as well as elective procedure trends has placed increased pressure on hospital finances and operations.

This is bleeding into other areas of healthcare particularly those most levered towards hospital capital equipment spending, as hospitals scale back or postpones high ticket equipment/IT system purchases.

Cardinal Health, which is heavily impacted by delay in hospital capital spending and the worsening economic conditions, is taking several measures to stay afloat.

Last September, Cardinal Health decided to spin off its Clinical and Medical Products businesses as a separate public company. The new company will be named CareFusion, reflecting a diverse blend of medical technologies it will offer to improve safety and quality of care. CareFusion will be headquartered in San Diego and is anticipated to generate about $4 billion in annual revenue.

The Clinical and Medical Products segment, which is being spun-off as a separate entity, would be led by current vice-chairman and Chief Executive Officer of Clinical and Medical Products David Schlotterbeck, as the chairman and chief executive officer.

Following the spin-off, Cardinal Health will retain its industry leading surgical gloves, drapes and apparel as well as fluid management businesses that are currently part of the Clinical and Medical Products segment. Cardinal Health would also retain the pharmacy services unit, the orthopedic implants and instruments business as well as the enteral devices and airway management products division and included the Medicine Shoppe International.

Cardinal Health is currently trading at $31.82, up 40 cents or 1.27% on a volume of 2.04 million shares.

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