* Kevin Lobo succeeds interim CEO Curt Hartman
* Hartman to leave company
* CEO search had been under way since February
* Stock falls 1.5 percent in afternoon trading
By Toni Clarke
Oct 1 Medical device maker Stryker Corp
on Monday named Kevin Lobo, head of its orthopedics unit, as
president and chief executive following an eight-month search.
Lobo, who joined Stryker in April 2011, succeeds Curt
Hartman, who has served as interim CEO since the abrupt
resignation of Stephen MacMillan in February. Hartman, Stryker's
chief financial officer, was considered a contender for the top
Stryker said Hartman was leaving the company to pursue other
opportunities, but will remain as an adviser to ensure a smooth
transition as the company searches for a new CFO. Dean Bergy, a
well regarded former Stryker CFO who became corporate secretary
last September, will serve as interim CFO.
"Hartman had been serving as interim CEO and presumably lost
out in an internal competition for the top spot," Derrick Sung,
an analyst at Sanford Bernstein, said in a research note.
Lobo, who will also sit on the company's board, has held
executive positions in general management and finance at a
variety of healthcare companies, most recently at Johnson &
Johnson, which he joined in 2003 as CFO of the McNeil
Consumer Healthcare unit.
In 2006, Lobo became president of Ethicon Endo Surgery, a
J&J unit that sells gastric bands, staples and other surgical
equipment. In 2011, the unit generated revenue of $5.1 billion,
according to J&J.
Investment analysts cautiously welcomed the news of Lobo's
appointment, which comes as medical device makers are struggling
to boost growth at a time when cash-strapped consumers are
cutting back on many elective procedures. But the analysts also
lamented Hartman's departure.
Jeremy Feffer, an analyst at Cantor Fitzgerald, said in a
research note that Lobo is "a solid choice," given his
experience in the orthopedic business and internationally.
"We are less positive on the Hartman news, as he had risen
steadily through the ranks since joining Stryker in 1990 and is
generally well liked by the Street," Feffer wrote.
Stryker's shares fell 1.5 percent to $54.80 in afternoon
trading on the New York Stock Exchange.
Sanford Bernstein's Sung said that while Lobo has a strong
record of operational management experience, "his experience
around capital allocation and M&A, the key issues surrounding
Stryker's stock today, remain relatively unknown."
Mergers and acquisitions in the medical device sector fell
during the global financial crisis, but industry experts say the
situation is likely to change as companies seek out innovative
Under MacMillan, who became Stryker's CEO in 2005, the
company diversified into new areas through a series of
acquisitions, reducing its exposure to the slowdown in
In 2011 it acquired a Boston Scientific business
that makes coils, guidewires and stents to treat neurovascular
disease. It also acquired Orthovita Inc, an orthopedics
biologics maker; and Concentric Medical, a maker of stroke
An analyst with Jefferies & Co, Raj Denhoy, said the
fundamental question for Stryker, as for most large medical
device companies, is whether to invest its cash in mergers and
acquisitions or return it to investors through buybacks and
"With the historic ethos at Stryker solidly grounded in
acquisition and growth, it had seemed unlikely that the company
would change its strategy," Denhoy said in a research note.
"While a new CEO could change the focus, it likely won't happen
David Lewis, an analyst at Morgan Stanley, said the choice
of Lobo suggests the company will continue to focus on
orthopedics sales outside the United States, "where performance
over the last two years has been less than optimal."
Some analysts expressed concern that the company did not
reiterate its financial forecasts, and suggested the change at
the top might give the company an opportunity to revise its
forecasts downward. But Lewis said the company likely made "a
prudent decision to give Mr. Lobo time to evaluate the strategic
Kalamazoo, Michigan-based Stryker said in July that it
expects sales growth of 2 percent to 5 percent in 2012, and
forecast double-digit earnings growth.
Stryker last month said it had to expand a recall of its
latest Neptune surgical waste management product line because
regulators said it did not have proper regulatory clearance.