Medtronic might consider spine unit sale
Painful news coming from Medtronic's ($MDT) spine unit this week: During its third-quarter earnings call, the company disclosed that revenue from its spine business declined 9% to $784 million compared with last year. And based on comments made during the call, some analysts predict that the company could be edging toward putting its spine business on the block.
"I was not happy with our overall performance," CEO Omar Ishrak said of the unit. "The year-over-year declines are simply not sustainable over the long term," he added. "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."
Those words seem to have caught the attention of analysts. "He did mention it as a possibility for the first time," said Tim Nelson, an analyst with Nuveen Asset Management, as quoted by the Pioneer Press. "Here we have the first indication that the new CEO is willing to stir the pot."
While spine indeed took a hit, another troubled busines--ICDs--also experienced a painful quarter. Third-quarter revenue from ICDs was $674 million, down 9%. The company blamed weaker ICD sales on fewer procedures in the U.S. However, pacing revenue came in at $467 million, representing growth of 3%.
Despite the disappointing spine and ICD news, there were bright spots for the company, including international sales and emerging markets. International sales accounted for 45% of Medtronic's worldwide revenue in the quarter. Meanwhile, emerging market revenue jumped 15% to $395 million, the company noted in a statement. Ishrak said during the call that Medtronic plans to grow its emerging market revenue to 20% of overall company revenue over the next few years.
Overall, Medtronic recorded worldwide third-quarter revenue of roughly $3.92 billion, a slight increase from the prior year period of $3.86 billion. Third-quarter net earnings were $935 million, or 88 cents per diluted share.