Profits for Medtronic Inc. (NYSE:MDT) ticked down during its fiscal first quarter, as new CEO Omar Ishrak makes his first substantial moves to reshape the company.
The Fridley, Minn.-based medical device giant reported profits of $821 million, or 77 cents per share, on sales of $4.05 billion for the three months ended July 29. That compares with income of $830 million, or 76 cents per share, on sales of $3.77 billion during the same period last year.
Analysts had expected earnings of 80 cents per share and weaker earnings for Medtronic’s $800 million spine division on the heels of a high-profile controversy over the safety of its Infuse bone growth product.
“Our first quarter results showed growth across many of our businesses. The major exceptions were ICDs and spinal products, where we continued to face challenges,” Ishrak said in prepared remarks. “My top priority is aligning the management team around improving execution and optimizing sources of growth.”
As expected, revenues for the spine business were off nearly 5 percent, falling to $825 million compared with $829 million during Q1 2011. Sales of Medtronic’s bread-and-butter cardiac rhythm management products were up 1.6 percent to $1.23 billion from $1.25 billion during the same period last year.*
The company held fast to its guidance for the rest of fiscal 2012, predicting revenue growth between 1 percent and 3 percent and diluted earnings per share of $3.43 to $3.50.
“In order to drive growth, we will be focused on three key imperatives – improving execution, optimizing innovation, and accelerating globalization,” Ishrak said. “As a company, we need to better adapt to our changing environment. We will significantly change the way we prioritize products in our pipeline, placing the highest emphasis on our ability to demonstrate not just clinical value, but economic value at both the customer and societal level. Ultimately, our goal is to use technology to both improve the standard of care and reduce healthcare costs, providing greater access to our therapies for the billions of people who are currently underserved. When we do this, we believe growth will improve.”
The new chief executive revealed his move to reshape the company, first reported by MassDevice this morning, in an email sent to employees last week. The most dramatic moves concern expanding Medtronic’s global footprint by creating eight geographic regions: the U.S., Western Europe/Canada, Latin America, Greater China, Asia (including Japan), India, Middle East/Africa and Central and Eastern Europe.
“Our goal is for each of the eight Regions to have direct representation on the Business Unit leadership teams,” he wrote. “As such, we will be phasing out the International General Manager (IGM) roles. In areas where we do not have dedicated Business Units represented within the geographies we will work with the current IGMs, the Business Unit leaders and the geography leaders to develop a transition plan. More detailed information will be communicated by the Group EVPs to their respective organizations. New assignments for the IGMs will also be communicated soon.”
MDT shares were down 0.35 percent to $31.18 in pre-market trading today.
*Correction, August 23, 2011: Due to a reporter’s error, this stroy originally reported that CRM sales fell 1.6 percent; they instead rose by that amount. Return to the corrected sentence.