Medtronic Recalls Product

Medtronic, Inc. (MDT - Analyst Report) is recalling some LifePak CR defibrillators as humidity may cause them to malfunction. These defibrillators were manufactured and distributed between July 9 and August 19 in 2008. The company started the process of recalling the products from July 31, 2009.

Defibrillators are designed to fix abnormal heart rhythms by delivering electric shocks. The affected products may break down in extreme humidity as they may fail to analyze the heart rhythm correctly. The device might not affect any electric shocks or delay sending electric shocks, which may seriously injure the patient. The products were manufactured by the company’s Physio-Control unit.

Though the magnitude of the product recall has not been disclosed, we think that this will hurt Medtronic’s bottom-line in the near-term. We can correctly estimate when the extent of product recall becomes known. However, we believe that this recall will have a minimal impact on the company’s long-term growth story.

Medtronic is one of the world’s leading medical technology companies, specializing in implantable and interventional therapy devices and products. The company’s main competitors include St. Jude Medical (STJ - Analyst Report) and Boston Scientific Corporation (BSX - Analyst Report).

Medtronic’s management has a typical ‘ONE Medtronic’ approach that encompasses the following goals: drive sustainable long-term growth of 9%-11% through innovation; focus on operating margins -- increase by 300 to 400 basis points; EPS growth of 11%-14% and return a minimum of 40%-50% of free cash flow to shareholders annually; and align the organization for consistent execution. Medtronic’s first quarter of fiscal 2010 results indicate that the company is well on track in achieving these goals.

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