Medtronic CEO Stays Just a Little Bit Longer

Don’t count out Medtronic Inc. Chairman and CEO Bill Hawkins just yet. The chief executive, slated to retire at the end of Medtronic’s 2011 fiscal year (April 29), is keeping his job and title—at least for near future, until his colleagues find a suitable replacement.

“The Board is making excellent progress,” Hawkins said in a letter to Medtronic employees on May 2. “However, this process takes time and will extend into early [fiscal year] 2012.”

Hawkins initially announced his retirement in early December, a decision that was not met with much surprise from analysts given the challenges facing the company at the time. Frustrations during Hawkins’ rein included poor stock performance and questionable acquisition decisions, but not all challenges were unique to Medtronic.

At the core of many of Hawkins’ challenges was the pressure of driving growth in an economy decimated by high unemployment, Wall Street’s financial meltdown, deflating real estate prices and consumers who are perhaps more cost-conscious than ever before.

“Anyone who comes in (to replace Hawkins) is going to face the same challenges,” Raj Denhoy, analyst at Jefferies & Co. said after Hawkins’ initial announcement.

One of the biggest questions for Hawkins’ successor will revolve around investments in new products and emerging markets: How soon can investments counterbalance the effects of growth challenges for Medtronic’s most profitable products? More than half of the company’s $15.8 billion earnings in fiscal year 2010 came from spinal and heart rhythm devices.

“We have our plan for [fiscal year 2012], and during this time of change, the most important thing we can do is stay focused on our business and our mission,” Hawkins said in the letter.

Part of that plan was enacted in the just-concluded fiscal quarter. In an effort to reduce costs and better align operations with market conditions, Medtronic reduced its workforce by approximately 5 percent. The company also consolidated its U.S. Vascular and Cardiac sales force to respond to the challenges hospitals face in the evolving healthcare environment. This change took effect May 1.

Medtronic executives have said they are looking for Hawkins’ replacement from outside the company.