Listening to the Medtronic earnings call this morning all we could think of is that the company is damn lucky none of the analysts have good memories. It wasn’t that long ago that the company was bragging about how their diabetes franchise would be growing in the mid to high double-digit rates and that their stand-alone CGM would become a billion-dollar product. Unfortunately for the company none of this has come true, not even close.
Here are the numbers;
Fourth Quarter Worldwide Growth Down 2.9%
Year to Date Worldwide Growth +11.7%
Fourth Quarter US Growth Down 10.8%
Since the company does not breakout revenue for each product line, we have to be content with their statement that the stand-alone CGM unit has had 4 consecutive quarters of triple digit growth. Which is likely accurate for when you start from zero any growth is triple digit. Seriously if analysts buy this crap about the stand-alone CGM unit becoming a billion-dollar unit we want what they are smoking. This isn’t going to happen anytime soon if ever.
We also loved how Hooman Hakami, who is temporarily running diabetes, tapped danced around the questions he was asked providing nothing much in the way of specifics but lots of fluff. But then again, he doesn’t want to cross his boss CEO Omar Ishrak who is also smoking something very powerful as he continues to hang onto the fantasy that the stand-alone CGM will become a billion dollar franchise and that the insulin pump unit is doing just fine in spite of all the evidence to contrary.
Frankly we aren’t surprised that Omar is standing by Hooman or that Hooman is being a very loyal solider as the two worked together at GE Healthcare and Hooman was Omar hand-picked man to lead to diabetes. Throwing Hooman under the bus would be tantamount to Omar admitting he made a mistake and Omar does not admit he makes mistakes. More than likely when the change in leadership comes it will come in one of two ways.
Either it will be another bullshit retirement story or Hooman will get to lead the company when it’s spun off from the mothership. Something that was quasi addressed during this morning’s Q&A, as expected Hooman extolled the virtues of being part of the mothership not daring to state otherwise for fear of offending his buddy Omar.
The facts are this things are not headed in the right direction and no matter what they say at their Investor Day at ADA nothing is going to change this fact. The company can continue to explain away the many errors they have made in diabetes, but the truth is the golden goose is wounded from a self-inflicted gunshot. That mid to high double-digit growth that was promised not that long ago that has not materialized and should have been a slam dunk with the Animas conversions never happened. That billion dollars from stand-alone CGM never happened either. The way cool whiz bang 670G which was supposed to deliver a knockout blow to the competition, not happening either.
Oh and should we mention that all those initiatives started when Hooman first took over are now dead and buried.
Omar and Hooman can waltz together all they want but they are not Fred Astaire and Ginger Rodgers. Bevis and Butthead maybe. The truth is Hooman came to Medtronic with one goal in mind to replace Omar when he stepped down. Omar brought in Hooman as he knew he was loyal solider who would never cross him. Given the many issues with the diabetes unit any other person but Hooman would have been gone a long time ago.
You can take it to the bank that the analysts will ooh and ah during the presentation at ADA. They will be impressed by the way cool whiz bang toys that are coming. They will eat this stuff up. What they won’t do is see the forest for the trees they will not examine how the insulin pump market is in the midst of a major transformation. That the old way of doing things will not work in the future.
The reality is Omar and Hooman are doing the Tennessee Waltz while everyone else is doing the shiggy. And for the record we have no clue what the shiggy is it’s what comes up when we Google 2019 popular dances. Personally we are partial to the hippie hippie, but we digress.
As Momma Kliff used to say all the time you can tap dance all you want around the truth but eventually the music will stop and the judges will issue their scores, the winners will advance, and the losers will be shown the door. Hey Omar and Hooman, don’t let that door hit you in the fanny on the way out.