Stryker pledges to fix its Europe problem

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Stryker (NYSE:SYK) has brushed off economic troubles in the U.S. for several quarters, but it has a European crisis of its own to deal with, company officials reiterated yesterday during the medical device company’s annual analyst day in Mahwah, N.J.

Ramesh Subrahmanian, the company’s international group president, said Stryker’s troubles in Europe go beyond the weak economy there, vowing to work hard to improve the company’s performance across the pond.

"I want to clearly acknowledge that Stryker has a significant challenge and we have lagged the European market situation for sure," Subrahmanian said.

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Stryker derived about 37% of its roughly $8 billion in sales in 2011 from international markets, from strong positions in Japan, Australia, Canada and parts of Western Europe.

But the bulk of the company’s sales come from inside the U.S., higher than its peers in the med-tech space which derive about 58% of their sales from international markets.

"Clearly, we are under-represented in international markets," Subrahmanian said.

A year into his tenure as the Kalamazoo, Mich.-based company’s international business leader, he said he’s looking to emerging markets such as China, India, Russia and Turkey as long-term growth drivers of for Stryker.

First up, however is a push to improve Stryker’s lagging performance in the European Union.

"Over the last few years, our European business has not kept pace with our own expectations," Subrahmanian said. "There are significant challenges in the EU market for sure."

It’s not the first time that Stryker has acknowledged problems with its EU operations. In a conference call with investors in July, interim CEO Curt Hartman told Leerink Swann analyst Richard Newitter that the company’s shortcomings in the EU were partly its own doing.

"We’ve had a number of ongoing organizational changes that we are working our way through, the right changes and the right structure moves to address where we see the European market moving to. And it’s been a bit of a moving target over the last couple of years for us and part of that is external environment focus," Hartman said at the time. "But we have to be intellectually honest. Part of that is our failure to execute, and we’re still a little bit playing catch-up to where the market is going and where we think we need to be.

"There’s no quick solution here. We’ve been working on this for far too long, frankly, and we just got to pay more attention to it," he said, noting that Stryker has lost market share to competitors such as Johnson & Johnson (NYSE:JNJ).

Subrahmanian said yesterday that improving market share in the EU is be a multi-stage process of re-organizing the operations and distributions channels in Southern Europe, addressing the company’s weakness in Germany and "leveraging the company’s full portfolio" while launching new products in those markets.

Long-term, he added, Stryker will look to continue its growth in emerging markets. The company derives only 6% of sales from developing nations.

"Any serious player must win in those top 5 markets," Subrahmanian said.

Although some analysts wondered if the annual meeting would be the occasion to announce a new CEO (or remoive the "interim" from Hartman’s title), there was no mention of a permanent replacement for Stephebn MacMillan, who’s abrupt ouster in February shocked med-tech.

Hartman did take care, however, to stress the experience of Stryker’s management team, which altogether boasts more than "100 years of Stryker experience."

"If you add up the broader med-tech experience of the group, it’s closer to 150 years," he told the assembled analysts. "[I]t is a seasoned med-tech team, and I think that’s very important in today’s environment, that you understand the management and leadership style that this group brings to the table each and every day."

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