Leading medical devices player, Medtronic (MDT) announced that Omar Ishrak will be its new chairman and CEO, effective June 13, 2011. Omar Ishrak has been president and CEO of the $12 billion GE Healthcare Systems, a division of General Electric (GE). Omar Ishrak will replace William A. Hawkins, who had announced in December 2010 his intention to retire at the end of fiscal 2011.
The appointment of Omar Ishrak as the CEO comes a day after, Medtronic’s competitor, Boston Scientific (BSX) announced that its President and CEO, Ray Elliott, will retire on December 31, 2011.
Based on the leadership of Omar Ishrak, GE Healthcare Systems reached several milestones. Revenues of the Clinical Systems Division almost doubled to $5 billion over a span of 5 years till 2009. Furthermore, revenues of GE Healthcare’s Ultrasound business increased from $400 million in 1998 to $1.8 billion in 2010.
However, his several years of experience will be put to test as he takes over the responsibilities at Medtronic. The company has been struggling for the past few quarters with declining sales at its largest segment – Cardiac Rhythm Disease Management (CRDM). Economic uncertainty resulting in slower market growth coupled with pricing pressure has affected the segment. Moreover, the second biggest segment, Spinal, is witnessing several challenges.
Over the past few quarters, Medtronic has adopted several strategies to regain some of the lost sales of these segments. These include, developing the product pipeline, focus on emerging markets and some meaningful acquisitions based on robust cash balance. There is a lot of insecurity regarding the course of action Omar Ishrak will adopt – whether he will follow the same strategy or embark on something new.
Medtronic recorded a 3% growth in revenues during the last reported quarter although sales continued to decline in its largest segments, CRDM. However, breaking the trend of the past few quarters, the Spinal segment recorded higher revenues, though challenges remain. Although investors would be looking up to the new CEO for the revival of these businesses, any solution in the short term is not on the cards.
We are currently ‘Neutral’ on Medtronic.
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