Core Viewpoint - The article discusses the challenges faced by Medtronic, including stagnation in growth, innovation fatigue, and pressure from activist investors, while exploring the potential for restructuring or revitalization [2][4]. Group 1: Activist Investor Involvement - Elliott Investment Management has entered Medtronic's shareholder list, advocating for a reassessment of the business portfolio and a focus on core assets to enhance shareholder returns [6][7]. - The entry of Elliott reflects a broader trend where undervalued large companies are pressured to divest non-core assets and improve capital efficiency [7][8]. - Medtronic's valuation disadvantage compared to peers indicates investor concerns regarding its management structure and innovation efficiency [8][9]. Group 2: Growth and Innovation Challenges - Medtronic's issues are traced back to the 2015 acquisition of Covidien, which has led to integration difficulties and cultural clashes [10][11]. - Financially, Medtronic reported approximately $32.3 billion in revenue for FY2024, with a net profit of about $5.1 billion, but its growth rate of 3% is below industry peers [11][12]. - The company's R&D spending of $2.6 billion represents only 8.1% of revenue, lower than competitors, indicating a slowdown in innovation output [14][15]. Group 3: Investor Perspective - Investors view Medtronic as a "sleeping giant," with stable financials but lacking growth appeal, as evidenced by a total shareholder return of less than 4% over the past five years [15][16]. - There is a demand for not just cost optimization but also significant innovation to change the valuation narrative [16][19]. Group 4: CEO's Response - CEO Geoff Martha asserts that Medtronic is in an "Innovation Super Cycle," with significant new products expected to launch between 2025 and 2027 [16][20]. - Martha emphasizes that the company's focus is on portfolio reshaping to enhance innovation rather than breaking up the company [19][20]. - The management is undergoing a dual reboot of structure and personnel to improve decision-making speed and execution [22][23]. Group 5: Future Directions - Medtronic aims to focus on financial recovery through divesting low-margin businesses and simplifying its organizational structure [23][24]. - The company is also working on bringing high-tech platforms to market, although the timeline for significant sales remains extended [24][25]. - The shift in focus from expansion to innovation reflects a recalibration towards core technological strengths, with the challenge of balancing innovation delivery and capital returns [25].

Financial Data and Key Metrics Changes - The company reported Q1 revenue of €8.6 billion, growing 8.4% reported and 4.8% organic, in line with guidance [38] - Adjusted EPS was €1.26, exceeding the midpoint of guidance by €0.03 [42] - Adjusted gross margin was 65.1%, down 80 basis points year over year, but stable compared to Q4 [38] Business Line Data and Key Metrics Changes - Cardiovascular grew 7% this quarter, driven by nearly 50% growth in Cardiac Ablation Solutions [21][22] - Neuroscience grew 3%, with high single-digit growth in neurosurgery and neuromodulation [11][28] - MedSurg grew 2%, with high single-digit growth in Advanced Energy [31] - Diabetes grew 8%, with 11% growth in international markets [34] Market Data and Key Metrics Changes - The U.S. market showed slower growth in certain segments, particularly in diabetes and pelvic health, while international markets performed better [60] - The company expects to ramp up procedures for the SIMPLICITY system following CMS's proposed national coverage decision [25][27] Company Strategy and Development Direction - The company is focused on accelerating growth through innovation and strategic investments in high-growth areas like CAS and Ardian [19][20] - A planned separation of the diabetes business is expected to enhance focus on core businesses and improve revenue and earnings growth [19][37] - New board committees have been established to enhance focus on growth and operational efficiency [48][49] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in accelerating growth in the second half of fiscal 2026, driven by strong demand and new product launches [7][19] - The company anticipates significant revenue growth from its PFA portfolio and other upcoming product launches [13][14] - Management highlighted the importance of maintaining pricing discipline and improving operational efficiencies to support growth [38][45] Other Important Information - The company is increasing investments in R&D, with a 7.7% increase in adjusted R&D spending [40] - The anticipated impact of tariffs has been adjusted, with expectations now at approximately €185 million for fiscal 2026 [44] Q&A Session All Questions and Answers Question: Update on CAS growth and its impact on U.S. growth - Management confirmed that CAS growth is accelerating and will positively impact U.S. growth, despite some segments showing slower growth [56][58] Question: Impact of new board committees on governance and operations - The new committees will provide focused oversight on growth and operational performance, with increased interaction with management expected to drive improvements [68][70] Question: Commitment to CAS annual sales target - Management reaffirmed the commitment to achieving $2 billion in annual CAS sales, indicating strong confidence in the growth trajectory [76][78] Question: Discussion on capital allocation and potential changes - Management indicated that the new board members and committees will facilitate discussions on capital allocation and value creation strategies [81][89] Question: Overall portfolio growth expectations - Management stated that while significant growth opportunities exist, they will not neglect the rest of the business and expect to see incremental growth from various segments [99][100]