) acquired privately held Cardiocom. The medical device major
took over this developer and provider of integrated telehealth
and patient services chronic diseases management for a total
consideration of $200 million. The acquisition is an attempt by
the company to rebuild itself as a health care service provider.
However, the acquisition is expected to be neutral to Medtronic's
fiscal 2014 earnings.
According to Medtronic, the acquisition of Cardiocom is the
first step toward its transition to a provider of broader
healthcare services and solutions with meaningful clinical and
economic value for hospitals, physicians, patients and
payers. At the initial phase, the company aims to capture a
significant share of the huge heart failure market. About 7.5
million people in the U.S. each year are affected by heart
failure. This leads to annual expense of $39 billion from 1.1
million hospital visits.
With the addition of Cardiocom's line of products and
services, Medtronic believes that it can now manage heart failure
more efficiently. Cardiocom's technological expertise and patient
services will expand Medtronic's reach among patients and thus
reduce burden on hospitals, physicians, payers and
As per the Centers for Disease Control (CDC), 7 out of 10
deaths in America are from chronic disease which mostly includes
heart disease, stroke, cancer, diabetes and
arthritis. Currently, chronic diseases account for $3 of
each $4 spending on health care or $7,900 per American.
We believe that the acquisition will help Medtronic reduce
the costs incurred due to chronic diseases, which is highly
important given the present scenario.
We are impressed with Medtronic's decision to diversify its
business in order to cope with the ever-changing medical and
healthcare market. Further, the strong guidance for the ongoing
fiscal boosts confidence. The company's focus on portfolio
expansion to boost revenues from emerging markets appears
impressive. However, looming headwinds such as soft economic
conditions, tough competition, segment pressure, and currency
headwinds keep us on the sidelines.
Medtronic currently carries a Zacks Rank #3 (Hold). Other
medical sector stocks that warrant a look are
). All three stocks carry a Zacks Rank #1 (Strong Buy).
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