With the sudden departure of Stryker ($SYK) CEO Stephen MacMillan (pictured), analysts are wondering whether his successor will continue his growth strategy. And some are even asking if his departure should raise red flags.
Last week, Stryker's board broke the news that MacMillan was leaving the company for family reasons. The Kalamazoo, MI-based company tapped CFO Curt Hartman as interim CEO. Analysts were quick to react to the news. "It's too bad that they are going to [lose] him, because he was very sharp, very competent from what I could tell," said Tom Swiat Jr., president of Olmsted & Mulhall, as quoted by MLive. "... He was the type of guy I'd like to do business with." Indeed, Stryker recently reported strong fourth-quarter and 2011 results. Net quarterly earnings increased almost 36% to $401 million over the prior year period.
However, as Summer Street Research Partners' Mark Landy points out, there are some red flags associated with MacMillan's sudden departure--particularly as to whether the new CEO will change MacMillan's vision for the company with a dogged pursuit of acquisitions, MLive notes.
Since MacMillan became CEO in January 2005, Stryker acquired at least a dozen companies, said Joanne Wuensch, an analyst with BMO Capital Markets. "He initiated the diversification practices," Wuensch said in an interview with Bloomberg. "He's been at the forefront of saying, 'How do I take this company and move it into a very different orthopedic market?'" During his tenure, Stryker looked into new arenas, including devices for treating brain aneurysms, strokes and the spine, Dow Jones notes. The associated acquisitions leave Stryker less vulnerable to a slowdown in elective orthopedic procedures.
MacMillan also steered the company through some tough times, including a Justice Department investigation into the orthopedic industry, and four warning letters from the FDA, she added.
Collins Stewart analyst Tao Levy told the news service MacMillan's departure isn't good for Stryker. "He's clearly had a good track record since he's been there. He's navigated the company well during some very difficult market times. He's done a good job in growing and diversifying the company over the last couple of years."
But not everyone is so sure that Stryker will be unduly hurt by MacMillan's departure, particularly with Hartman potentially poised to take over. "They're unusually well-positioned to deal with this unfortunate experience because of Curt's extensive operational experience," Piper Jaffray's Matt Miksic said, as quoted by Dow Jones. He sees Hartman as a prime candidate to replace MacMillan.