Cerner begins layoffs that will affect hundreds of employees

Posted on: Thursday, September 5, 2019 By: KorchekStaff

Cerner Corp. will lay off 255 of its U.S. employees in an effort to boost operating margins to 20% by the end of the year. Workers will be notified throughout the day on Wednesday, a spokeswoman said.

About half of those layoffs will come from workers in the Kansas City area, Joe Mandacina, Cerner's head of corporate communications, told the Kansas City Business Journal last week. The employees affected are from all levels of the North Kansas City-based health IT company (Nasdaq: CERN), including the executive level, he said.

Cerner ranks No. 1 on the Kansas City Business Journal's Top Private-Sector Employers List, with 14,000 local employees as of June 1. In total, the company employs about 30,000 people globally, 95% of whom work in the U.S., India, Germany and the United Kingdom.

A Cerner spokeswoman confirmed departures also were taking place in the UK, but all were voluntary and represented a "small number."

It's unclear how many employees in Cerner's other foreign offices have been affected.

"As mentioned in our earnings call earlier this year, we're looking to identify organizational efficiencies as we implement our new operating model. Part of that strategy includes a realignment of resources focused on key growth areas across the company. We've onboarded nearly 3,000 associates this year and will continue to hire hundreds more throughout 2019, many of those in Kansas City. Impacted associates are eligible for those opportunities," Cerner said in an emailed statement.

In April, activist investor Starboard Value LP agitated for two spots on the company's board and successfully fought for a broader string of cost and structural changes.

As part of a cooperation agreement, Cerner is focused on improving its adjusted operating margin, with targets of 20% for the fourth quarter of 2019 and 22.5% for the fourth quarter of 2020.

During a second-quarter earnings call in July, CFO Marc Naughton said the company's voluntary separation plan has saved $40 million. The buyouts, along with other organizational restructuring efforts, also affected the company's operating cash flow.

Naughton said that Cerner's cost-efficiency process is ongoing and that the end goal for cost-cutting is around $200 million to hit the company's margin goals for the fourth quarter of 2020.

Starboard Value recently decreased its already small stake in Cerner by 3.1% last month.

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