Scott Garrett brought big change to the county’s oldest medical technology company, boosting profits and ruffling some feathers along the way.
Garrett’s five-year run as chief executive of Brea-based Beckman Coulter Inc. abruptly ended last week as the company wrestles with a costly test recall that’s been met with dismay on Wall Street.
J. Robert “Bob” Hurley, Beckman’s senior vice president of human resources and a key player on a recent acquisition in Japan, has taken over as chief executive and is leading a search for a permanent replacement.
Garrett’s staying on as an employee through Jan. 15 to help with the transition.
The sudden change is unusual for Beckman, known for long reigning chiefs and steady handoffs to successors. Gar-rett was just Beckman’s third chief executive in the past 28 years.
The company, started by Orange County icon Arnold Beckman, makes medical testing machines and chemicals used by hospitals, medical laboratories and researchers.
In recent months, investors have hammered Beckman over a March recall of a test to detect heart attacks.
The recall has prompted a big downward revision in Beckman’s 2010 profit forecast and driven a 30% year-to-date drop in Beckman’s shares, which had a market value of $3.1 billion last week.
The recall proved to be the undoing of Garrett, who dramatically reworked Beck-man through restructuring and deals.
The recall and related delays in product launches “had led to a loss of investor confidence,” said analyst C. Anthony Butler of Barclays Capital.
“We would argue that this loss of credibility and mounting pressure from investors may have played a major role in Garrett’s departure,” Butler said in a note to clients.
The recall has brought heightened Food and Drug Administration scrutiny and the prospect of shareholder lawsuits from law firms that pounce on corporate missteps.
“We do think the overhangs related to various regulatory and financial performance issues may have played a role in Garrett’s departure,” said Quintin Lai of R.W. Baird & Co., a Milwaukee-based investment bank.
Garrett had been a favorite of Wall Street as Beckman’s shares outpaced Standard & Poor’s 500 index for much of his tenure. In 2009, Beckman’s shares saw a 50% gain, versus 23% for the S&P 500.
The company’s yearly sales grew from $2.4 billion in 2004, the year before Garrett took over as chief executive, to $3.3 billion last year.
Milwaukee native Garrett brought a low-key Midwestern personality and corporate and financial savvy to Beckman.
He came to the company in 2002 as head of Beckman’s dominant clinical diagnostic business, which provides machines and supplies to hospitals and medical laboratories running tests for doctors.
In an orderly transition, Garrett replaced longtime leader John Wareham as chief executive in early 2005.
Changes
He brought change to a company known for stability and reverence for founder Beckman, and Wallace and Joseph Coulter, who founded 1998 acquisition Coulter Corp.
An early shift under Garrett came in how Beckman recorded revenue for leases of its machines—workhorses that run tests on blood and urine.
In 2005, Beckman switched to operating leases where revenue was spread over the life of a lease. Before, Beckman recognized the value of a lease all at once.
The change caused an initial dip in sales and profits and required some hand-holding on Wall Street.
The shift was designed to create a more steady flow of revenue. The new leases also locked customers into buying testing chemicals and other supplies from Beckman.
About 80% of Beck-man’s sales and a good chunk of its profits come from ongoing sales of supplies for its mach-ines.
In 2006, Garrett re-worked how Beckman distributed its machines as he consolidated six smaller warehouses into an 180,000-square-foot center in Chino.
Garrett’s biggest break from the past, at least symbolically, came last year when he moved the company from its longtime Fullerton headquarters to company offices in neighboring Brea.
In 1954, founder Beckman, who died six years ago at age 104, moved what then was Beckman Instruments Inc. to Fullerton from Pasadena, spawning the county’s medical technology industry.
Garrett’s efforts to streamline Beckman brought grumbling from the company faithful, much of it done anonymously on industry chat boards.
There, former employees complain about experienced people being laid off and “tarnishing the legacy of Arnold Beckman, Wallace Coulter and Joe Coulter,” in the words of one post.
Deals
Deals were a big part of Garrett’s legacy.
In 2009, Beckman made its biggest deal since the buy of Miami’s Coulter a decade earlier by paying $800 million for the laboratory diagnostic business of Japan’s Olympus Corp.
Beckman sought the Olympus business to get a larger share of the European market, where it competes with big rivals including Germany’s Siemens AG and Roche Diagnos-tics Corp., part of Switzerland’s Roche Hold-ings Ltd.
Interim Chief Hurley—no relation to Bob Hurley, founder of Nike Inc.’s Costa Mesa-based Hurley International LLC—has been with Beckman since 2005.
He lives on Balboa Island with a second home in Big Bear.
The retired Army captain previously was with Baxter International Inc. and played a major role in integrating the Olympus diagnostic business into Beckman.
He’s chairman of Beckman’s operations in Japan.
“I’m the top person in Japan, so right now, I’m running it,” Hurley told the Business Journal early this year. “When I finish getting it put together, I’ll turn it over to somebody else.”
