Medtronic Names Omar Ishrak CEO, Replacing Retiring Hawkins
Medtronic Inc. (MDT) named Omar Ishrak of GE Healthcare Systems as chairman and chief executive officer, giving him the job of halting declining sales of the device- maker’s biggest products.
The appointment of Ishrak, a 55-year-old outsider who was president and CEO of a $12 billion division of General Electric Co. (GE), is a break from tradition, as Minneapolis-based Medtronic previously chose chief executives from within. He will replace William A. Hawkins, who announced his plans to retire in December, the company said in a statement.
Ishrak will take over the world’s largest device-maker on June 13 as the weak economy and safety concerns erode demand for pacemakers and defibrillators. His appointment, a day after Boston Scientific Corp. (BSX) announced its search for a new leader, is a step in the right direction, although questions remain about where the company is headed, said Michael Weinstein, a JPMorgan analyst in New York, in a note to investors today.
“After months of speculation, we view the resolution of the CEO search as a positive for Medtronic,” Weinstein said. “The question from here is what is Ishrak’s mandate? Is it same strategy, better execution? Or are there more aggressive plans for Medtronic in the months ahead? Our expectation is the former is much more likely than the latter.”
Medtronic fell 40 cents to $42.25 at 1:18 p.m. in New York Stock Exchange composite trading. The shares had gained 15 percent this year before today.
Ishrak spent 16 years at GE Healthcare, the world’s biggest maker of medical imaging equipment. He ran the largest portion of the Chalfont St. Giles, England-based business, which develops X-ray machines and MRI, CT, ultrasound and PET scanners, with 20,000 employees in 120 countries.
The ultrasound division under Ishrak rose to $1.8 billion last year from about $400 million a decade ago. Most recently, he led an effort to bolster efficiency and new products, with 80 slated for 2010 and 2011. Those achievements showed Ishrak’s leadership in research and development allocation as he increased profitability, wrote Vertical Research Partners co- founder Jeffrey Sprague, who follows GE and called the appointment “a loss for GE, a win for Medtronic.”
“Ishrak has a reputation as a solid operator with extensive domain expertise,” Sprague, who is based in Stamford Connecticut, wrote in a note to clients today. “We have watched him successfully grow as a business leader within GE Healthcare for more than a decade.”
He has a Bachelor of Science degree and doctorate in electrical engineering from the University of London, King’s College.
GE Healthcare Systems named Tom Gentile president and chief executive officer, replacing Ishrak. Gentile was vice president of GE Aviation’s services division, where he led a team that grew the business into a $7 billion global operation, the company said in a statement today.
Medtronic is cutting its workforce and selling a defibrillator unit as revenue from the company’s biggest products -- pacemakers and defibrillators -- fell 2 percent in the three months ended Jan. 28. Hawkins was named as CEO in 2007, amid quality-control setbacks.
Ishrak’s background and experience with reviving sales should help him map Medtronic’s strategy, said Larry Biegelsen, a Wells Fargo & Co. analyst in New York. He has a solid track record within GE Healthcare, where sales at the ultrasound business quadrupled and clinical systems grew 40 percent under his leadership, Biegelsen said in a note to investors.
He has a reputation as a good manager with strength in operations and marketing, said Derrick Sung, an analyst with Bernstein Research in New York, in a note to investors today. He will need time to transition from a focus on capital equipment and service to implanted medical devices, Sung said.
“However, we like that Ishrak brings a fresh perspective to medical implantables while still retaining a broad understanding of the medical technology space,” he said. “We believe this combination of operational strength, outside perspective, and healthcare experience fits the criteria that many investors have been looking for.”
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