For Covidien, Independence Has Its Own Risks

Covidien, the device company spun off yesterday from Tyco International, saw its shares rise on its first day of trading as its own entity. It could be a harbinger of success for a firm no longer burdened by the wrongdoings and excesses of its corporate parent.

July 3, 2007

1 Min Read
For Covidien, Independence Has Its Own Risks

But the story isn't that simple, says Boston Globe columnist Steven Syre in a piece today.When what is now Covidien was part of the Tyco conglomerate, Wall Street and the public had no idea how the unit performed in and of itself; only overall results for the corporation were reported. So if there were any problems with performance, they didn't have as much of an effect on Tyco's stock price as they would on Covidien's price going forward. Syre says some on the Street believe that when it was part of Tyco, Covidien invested less in R&D than its competitors. If that turns out to be true and doesn't change, it will now be noticed by all -- and there could be consequences for the stock price. Covidien executives need to commit to making the company a leader in the pipeline (whether through innovation or acquisition), not just in size. Investors are counting on it.

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