With 2007 revenues of $12.3B, Medtronic(NYSE:MDT) is the world's largest medical device company. MDT is best known for its pacemakers but also produces a wide range of other medical devices, including external defibrillators, insulin pumps and image guided surgery systems.
In 2007, Medtronic issued a recall of its SprintFidelis leads. These wires, which connect the pacemakers to hearts of patients, were found to sometimes malfunction and have already been implicated in several deaths. In addition to the expense associated with replacing the leads (embedded in the patients chest), Medtronic may face substantial legal liability. On the other hand, the company could benefit substantially from the growing diabetes market. Diabetes is strongly related to obesity, and as obesity rates continue to rise throughout the world, the market for diabetes is expected grow accordingly.
MDT operates in eight main segments:
In 2007, MDT had revenue of $12,299 million. This was a 9% increase over the $11,292 million generated in 2006. CRDM, the largest segment, only grew 2 percent to $4.876 billion. Instead, the growth was led by Vascular sales which increased 28% to $1.205 billion, Diabetes sales which increased 20% to $863 million, and Neurological sales increased 16% $1.183 billion. 
US sales accounted for 64% of revenue, with international revenues accounting for the remaining 36%.
Health coverage is an important determining factor when patients and doctors choose among various treatment options. Medicare coverage is particularly significant in that it directly affects over forty million Americans, how much patients have to pay for Medtronic products, and how much Medtronic will receive in payments from Medicare. Currently, Medicare and other third party payors are emphasizing more cost-effective medical devices, by limiting the reimbursement they will cover. Furthermore, even if a new medical device is cleared by the FDA, Medtronic faces limited demand for the device until Medicare and other payors approve the device for reimbursement. For example, in 2005 MDT conducted a large study on Sudden Cardiac Death in Heart Failure and showed the effectiveness of its ICD. Following this study, Medicare expanded coverage of ICDs for heart patients, which boosted MDT's revenues.
Medtronic and its competitors are all heavily affected by government regulation, especially by the FDA, which is responsible for regulating food, dietary supplements, drugs, medical devices, and other products in the United States. Without FDA approval, Medtronic cannot sell any of its medical devices to the public. If any of Medtronic's devices fail FDA approval, it can adversely affect the company's sales.
Diabetes currently affects around 200 million people worldwide, including 21 million people in the U.S. It is estimated that more than $132 billion is spent annually on diabetes and its complications. One of the key risk factors for diabetes is Obesity, which has been on the rise in the United States. MDT currently has several products that serve the diabetic market, and it represents an opportunity for MDT to generate additional revenue in this large and expanding market. In 2007, MDT's diabetes division had revenue of $863 million and experienced growth of 20% over 2006.
ICDs are stopwatch-sized devices that monitor the heart and deliver appropriate therapy when an abnormal heart rhythm is detected. Medtronic holds over 50% market share for ICDs and this product contribute about 25% of Medtronic's sales. ICDs usage has grown substantially over the years, due to trial results which showed ICDs reduced death by 23% in people with moderate heart failure compared to those who did not receive ICDs.  However, growth in this market has been declining recently as the patient population which ICDs serve is substantially penetrated. If MDT can't sell as many ICDs as it has in the past, its sales may be adversely affected.
As mentioned above, MDT faces strong competition in nearly every segment that it operates in. Some of its chief competitors overall include Boston Scientific (BSX), Stryker (SYK), Zimmer Holdings (ZMH), St. Jude Medical (STJ) and JOHNSON & JOHNSON (JNJ).
Primary competitors in their various business lines include: