WASHINGTON (AP) — Medtronic said Monday that Chairman and CEO William A. Hawkins will step down in April after three years leading the world’s largest medical device manufacturer.
The announcement took Wall Street by surprise, given Hawkins’ short time on the job and relatively young age. But given the company’s sluggish performance in recent years, analysts mostly affirmed the board of director’s decision to seek new leadership.
“He came into a challenging environment where the key market for the company’s bread and butter products was already in decline,” said Edward Jones analyst Aaron Vaughn. “It’s not Bill Hawkins’ fault that the stock is where it is, but he is the CEO of the company and the board had to do something.”
Under Hawkins’ leadership, shares of the Minneapolis-based company have declined nearly 30 percent.
Hawkins, 56, will retire at the end of the company’s fiscal year on April 29, the company said in an announcement. The company is currently searching for a replacement and Hawkins will stay with the company until a successor is named.
Hawkins took the reins at Medtronic in August of 2007, following a high-profile recall of defective wires used in its defibrillators. He joined the company as a senior vice president in 2002.
Medtronic makes a wide range of medical implants including heart-pacing devices, drug pumps and artery-opening stents.
During Hawkins’ tenure the company has faced weakening sales of its products, due to unemployment and loss of health insurance in the U.S. As a result, the company announced layoffs last year and was forced to slash its 2011 earnings expectations. Hawkins also oversaw the integration of spinal implant maker Kyphon, a $4 billion acquisition that has failed to live up to analyst sales expectations. Additionally, the company was cited by the Food and Drug Administration for manufacturing problems, hampering its ability to launch new products.
Analysts saw the announcement as a positive for the company, and praised Medtronic’s decision to look outside the company for a replacement.
“We are encouraged by Medtronic’s plan to bring in an external candidate, which we believe can bring fresh ideas and strategies to help reinvigorate the business and boost company credibility,” said Wells Fargo analyst Larry Biegelsen, in a note to investors.
Shares of Medtronic Inc. rose 55 cents to $37.95 in morning trading.
After a strong run-up through the 1990s, Medtronic shares touched $62 on Dec. 26, 2000, but they have been treading water in the past few years and shares are down 13 percent in the past 52 weeks.
Medtronic and other device makers have struggled in recent years to make up for slowing sales of their top-selling products, implantable defibrillators and stents, which have been hurt by safety concerns and increased pricing competition.
Defibrillators are implanted in the chest and use electrical jolts to correct deadly irregular heart rhythms. The devices are Medtronic’s top-selling franchise, though their sales forecast is bleak going forward. Last quarter, Medtronic said market growth for the devices will be flat to negative, while international growth is in the mid-single digits.
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