“The disposable, low-tech devices that Covidien did, it’s not in the sweet spot of what gives Medtronic its competitive superiority over and against everyone else,” Watson said. “And you can see the result in that almost everything that was acquired with Covidien is now gone. And it’s gone because it never fit the central strength that has made Medtronic historically successful.” A Medtronic spokeswoman notes most Covidien products are still being sold.
While the stock is up about 19% year to date, its price peaked at more than $134 in September 2021, and has fallen since then, hovering below $100 for three years running. Meanwhile, competitor Boston Scientific’s total market value now eclipses Medtronic’s despite having less than half the annual revenue of its rival.
Those who worked at Medtronic in the past decade say travel restrictions and growing pressure to hit quarterly performance benchmarks are now more common. Layoffs also became more frequent. Business units have grown more siloed, competing for resources, and Medtronic started operating more like a holding company than an enterprise with a cohesive identity, they said.
Michael Hill, a former Medtronic vice president of science, technology and clinical affairs, said the company has lost its way on innovation. Leadership changes in the 2010s, he said, triggered an era in which Medtronic started focusing on what he calls “finance games”: buying predictable companies and selling parts of its portfolio to fuel growth instead of banking on internal research and development.
Spending on research and development plateaued at 8.15% of total revenue in the last fiscal year, about 2 points lower than in 2007. Competitor Boston Scientific spent the equivalent of 9.64% of revenue on R&D in 2024.
Since Covidien, Martha said Medtronic has refocused R&D on “bigger things,” but he hopes to lift R&D expenditure as a percentage of sales closer to 10%.