The message to Medtronic’s (NYSE:MDT) spine business from chairman and CEO Omar Ishrak was clear today: Shape up or ship out.
During a conference call with analysts to discuss the med-tech titan’s fiscal 3rd-quarter results, Ishrak said he was “not happy” that the division posted a 9% revenue decline and warned that the spine unit must raise its game or face the consequences.
“[W]hile individually each part of spine has explainable reasons for their performance, collectively the year-over-year declines are simply not sustainable over the long-term,” Ishrak said. “While we continue to believe in the potential of this market, we urgently need to see meaningful signs of improvement from our current initiatives. If we do not, we will need to reassess our strategy and approach for this business.”
Later on the call, in response to a question from Goldman Sachs analyst David Roman, Ishrak clarified that the reassessment would include a look at the group’s organic growth strategies.
“Sure, inorganic alternatives of all sorts exist, but I’m going to look at organic alternatives as well, reassess the way in which we are growing our spine business,” he said. “If certain strategies are not delivering the results we expect, you’ve got to do some things differently, but organic alternatives are also absolutely in our cards.”
That said, a divestiture is always on the table, for the spine business or any other unit, Ishrak added later in the call.
“If at any time we find that the overall Medtronic is not adding enough value to that sub-business and that business can be better off on its own, then that becomes a candidate for the divestiture, absolutely,” he said.
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