The naming earlier this month of Robert Palmisano as chief executive of Ev3 Inc. sparked a question: Would the longtime Orange County executive bring the Minneapolis-area medical device maker here?
After all, Ev3, which makes devices to treat arterial disease, already employs 325 people in Irvine, about a fifth of its 1,500-person workforce.
But in this case, it’s Palmisano who’ll be doing the moving.
“The headquarters of the company will remain in Minneapolis,the board really made that clear to me,” he said. “The weather’s certainly nicer in Orange County. But the majority of the people remain in Minnesota.”
On April 7, Palmisano replaced James Corbett, who served as Ev3’s chief executive, president and chairman for four years.
Moving to Minnesota
Palmisano said he plans to buy a house near Ev3’s corporate office in Plymouth, Minn., a Twin Cities suburb. He plans to spend time in OC “on a pretty regular schedule,” he said.
Locally, Palmisano is known for his role as chief executive of IntraLase Corp., an Irvine maker of eye lasers that was bought for $800 million last year by Santa Ana-based Advanced Medical Optics Inc.
He lived here while running IntraLase and moved to Boston in the past year to work for British venture capital firm SV Life Sciences Advisers LLP.
The goal at Ev3, Palmisano said, is gaining credibility with Wall Street.
“The company has disappointed Wall Street and its investors by not meeting its guidance over a period of time, so the thing I have to do is get my arms around the business that’s here,” he said.
Earnings Warning
Earlier this month, Ev3 forecast first-quarter revenue of $101.3 million, down from an earlier projection of $107 million. The company blamed slow progress integrating its $1.7 billion buy of Redwood City-based FoxHollow Technologies Inc., which was completed in October.
Ev3 also pulled its profit guidance for the year. First-quarter results are due May 2.
The addition of Palmisano is a “first step to recovery” for the device maker, said FBR Capital Markets analyst Christopher Warren.
“Bob Palmisano replaces Jim Corbett at a time when (Ev3’s) guidance does not reflect reality,” Warren said in a client note.
Ev3’s growth and market share have been hurt by competition and doctors’ preference to use balloon-based devices rather than its metal stents to treat blood vessel diseases, according to Warren.
“We expect Bob to lower expectations to a level where execution can match expectation,” Warren said.
Earlier, Ev3 said that its fourth-quarter sales would miss goals because of integration problems with FoxHollow. The company also missed revenue expectations in the quarter before buying FoxHollow.
Palmisano’s Background
Palmisano’s performance at IntraLase, a maker of lasers used in vision correction surgery, appeals to Wall Street.
He took IntraLase public in 2004 and grew it before selling to Advanced Medical.
Palmisano “has an extremely good reputation on Wall Street,” said Thomas Gunderson of Piper Jaffray Cos. “He’s made money for people twice in the past. He’s highly regarded, so he starts out with a honeymoon glow.”
Besides IntraLase, Palmisano sold another device company, eye laser maker Summit Autonomous Inc., in 2000 to Alcon Inc., a Nestl & #233; SA unit with some 600 workers in Irvine.
As for Corbett’s departure: “From a Wall Street investor standpoint, he was teetering on the edge. The company had to perform this quarter to expectations or somebody was going to have to take the rap, and that turned out to be Corbett,” Gunderson said.
FoxHollow Issues
Corbett orchestrated the deal for FoxHollow, which makes devices that doctors use to clear blockages in leg arteries.
Ev3 took an “appropriate risk” in buying FoxHollow, according to Gunderson, “and very quickly, it appears that things started to be not quite what Ev3 thought.”
An inventory glut and problems in combining the companies’ sales forces, along with a declining market for FoxHollow’s core devices, all have played into the problem, Gunderson said.
“It appears, in talking to some of the doctors, they’re waiting to see whether this kind of technology really is long lasting or whether it’s a temporary fix requiring something else later on,” Gunderson said.
Since January, Ev3’s shares have been down 40% with a market value of some $830 million.
Corbett, an OC resident with a vague resemblance to actor Jim Belushi, shuttled back and forth between Irvine and Minnesota. His career also included serving as chairman of Micro Therapeutics Inc., which Ev3 bought in 2006.
Dan Levangie, an Ev3 board member, takes the non-executive chairman role.
