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New Medtronic CEO Backs Off 15% Growth Pledge

Medtronic's new chief executive is not taking his predecessor's pledge to deliver 15 percent earnings and sales growth over any five year period.

"It's not prudent," William Hawkins told Reuters in an interview. "This is a dynamic market..."

Hawkins pondered the downfall of the market for drug-eluting stents - tiny wire mesh tubular devices that prop open diseased arteries and deliver drugs to keep them from reclosing after angioplasty.

"Who would have predicted the decline in the drug-eluting stent market a couple of years ago?" asked Hawkins, who joined Medtronic six years ago.

Both the $5 billion drug-eluting stent market and the $9 billion market for implantable heart defibrillators, which manage errant heartbeats, have contracted sharply over the past couple of years after safety concerns and product recalls curbed their uses.

Minneapolis-based Medtronic makes an array of medical devices, including insulin pumps, artificial disks and products used in neurology. It posted sales of $12.3 billion in its fiscal year ended April 2007.

Hawkins, in Cleveland to speak to a group of healthcare professionals, investors and business leaders at the Cleveland Clinic, said he planned to do a better job managing Wall Street's expectations. Hawkins, who took the helm in August, also will not provide quarter-by-quarter forecasts.

Speaking of his predecessor, Hawkins said Art Collins, CEO from 2001 to 2007, did what was right for his era but times have changed.

"I'm not afraid to take on risk. I've done it my whole career," he said, adding that he led the move to buy Kyphon, a maker of spinal products, to bolster its orthopedics business.

The $3.9 billion acquisition, hailed by Wall Street, was announced in July and is expected to close in the first quarter next year.

Hawkins hoped Medtronic's share price would soon reflect the accomplishments of the company and noted the stock hit a new year high of $57.98 on Monday.

But, the shares have been trading within a narrow range in the mid- to high- $40s to low- to mid-$50s going back to 2000.

"I feel we are we are well positioned right now," said Hawkins, who also served as CEO of Novoste Corp before joining Medtronic.

The implantable defibrillator market, of which Medtronic commands nearly half, has finally started to stabilize, he said. He predicted "modest growth" in cardiac rhythm management devices in 2008.

"We don't need 20 percent growth in (Cardiac Rhythm Management) to deliver superior earnings," said Hawkins. The company will continue to buy back its shares to offset dilution and may accelerate repurchases if shares depreciated significantly, he said, adding he foresaw no change in the dividend.

He reiterated his position that Medtronic does not seek major acquisitions to drive growth, but may do "tuck-in" acquisitions, possibly in new therapeutic areas.

"It will be an important part of our overall growth strategy," he said.

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