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Stryker CEO's surprise exit sends shares lower

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Former Stryker CEO Stephen MacMillan is shown in a stock image from Reutuers.  MacMillan resigned suddenly Wednesday February 8th, 2012.
Former Stryker CEO Stephen MacMillan is shown in a stock image from Reutuers. MacMillan resigned suddenly Wednesday February 8th, 2012.

(Reuters) - The surprise departure of Stryker Corp's (SYK.N) chief executive officer, amid an ambitious effort to diversify the orthopedics device maker, sent its shares lower on Thursday.

Stryker said late on Wednesday that CEO Stephen MacMillan had resigned for family reasons. The company did not elaborate on the circumstances behind his departure.

Chief Financial Officer Curt Hartman will be the interim CEO while the board searches for a permanent replacement.

"I like moves (management has) made and the acquisitions that diversified the company," said David Heupel, portfolio manager at Thrivent Investment Management. "(MacMillan) was fairly well-regarded, so to have something like this happen out of the blue is just disappointing."

MacMillan, who joined Stryker nine years ago as president and chief operating officer, was promoted to CEO in 2005. Under his leadership, Stryker diversified its holdings into new areas through a series of acquisitions, reducing its exposure to a sharp slowdown in orthopedics sales as Americans hold off on medical procedures in a weak economy.

In 2011, Stryker acquired a Boston Scientific (BSX.N) business that makes coils, guidewires and stents to treat neurovascular disease. It also acquired Orthovita Inc, an orthopedics biologics maker, and Concentric Medical, a maker of stroke treatment devices.

MacMillan is leaving at a crucial time for the company, said Heupel, whose fund does not own a significant number of Stryker shares.

"He deserves credit for that diversification," Heupel said, adding that if the board brings in an outsider as CEO, they may be less likely to follow MacMillan's strategy.

"Last year, they were aggressive about buying businesses," he said. "This is the year of integrating all the stuff ... That's execution, and the comfort level is greater when the CEO is around. I'm sure the CFO will do fine, but it's not ideal."

The company declined to comment further on the reason for MacMillan's departure.

Morningstar analyst Julie Stralow said she was surprised and disappointed by the news.

"I liked where the management team was headed," she said. "They were forward-thinking. My overall take is that this adds a layer of uncertainty over the short term, but over the long term, this is a quality business."

She said Stryker shares were "attractively valued," but she would not be a buyer unless the stock hits the mid-$40s. The shares were down 1.2 percent at $54.09 in afternoon trading.

JPMorgan analyst Michael Weinstein advised his clients to buy Stryker shares on any weakness.

"We can state with confidence that this (resignation) is for personal reasons and is not a reflection of any new fundamental or strategic issues or of a change of direction at Stryker," he wrote in a research note.

Weinstein said MacMillan's departure should not affect the company's 2012 performance and outlook.

(Reporting By Debra Sherman; Editing by Michele Gershberg, Derek Caney and Lisa Von Ahn)

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