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David Schlotterbeck

Architect of CareFusion spin-off plans to retire

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David Schlotterbeck was already considered a turnaround specialist -- he revamped seven ailing companies, including San Diego’s Alaris Medical Systems Inc. -- when he championed the idea of spinning CareFusion off from Cardinal Health.

“There’s really only two reasons a parent company would do a spinoff,” Schlotterbeck explained in a recent interview. “Either there’s no synergy between the parent company and the spin-off, or the spin-off is sort of a hot item and would actually do better if it were independent. We were in the latter category.”

He learned a number of important business principles from the 2009 transaction, including that, “If you’re the spin-ee, you deal with most of the frustration. In you’re the spinner, you don’t.”

The parent company makes the rules, he said.

The process of separating CareFusion Corp. (NYSE: CFN) from Cardinal Health (NYSE: CAH) has taken a lot of time, detail and resources, Schlotterbeck said. He estimates that some 400 people worked on the spinoff for a year, though the companies won’t entirely part ways until June 2011.

He feels strongly that CareFusion is now better positioned in the medical device market. So much so that he’s planned and announced his retirement as CareFusion’s CEO and chairman, effective Feb. 28, 2011.

“I think the company is in very good shape. We are very far along in finishing the systems for the separation from Cardinal. We have a strong management team. We’ve delivered some very good numbers, and I feel good about where we are.”

In November, CareFusion reaffirmed its fiscal 2011 earnings guidance of $1.58 to $1.68 per share, up 11 percent to 18 percent over fiscal 2010, with revenue growth of “mid single digits” over fiscal 2010’s $3.9 billion. The company, which employs some 2,000 people in San Diego, will introduce about 20 new health care products in fiscal 2011, according to Schlotterbeck.

“There’s a lot of innovation that’s going to happen in 2011,” he said.

CareFusion is in the process of finding Schlotterbeck’s replacement, a task complicated by the specificity of the job, he said.

“We’re looking for some highly specialized people that have a med-tech background,” Schlotterbeck said. “The holes in the net are pretty fine. The type of people who have this specialization are somewhat few and far between.”

As for Schlotterbeck’s retirement plans, said he intends to take up some hobbies, including skiing, boating and playing the piano, and plans to serve on a few corporate boards. Just not CareFusion’s.

“About the last thing a new CEO needs is the old CEO looking over his shoulder,” he said.

McEntee is a San Diego-based freelance writer.

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