2nd UPDATE: Medtronic Consolidate Businesses Into Two Groups

Medical-devices giant Medtronic Inc. (MDT), which has been restructuring amid efforts to control costs and manage pressure on top businesses, said Monday it is moving its various business units into two main groups.

The moves include some changes among Medtronic's top managers, and Medtronic said it's searching outside the company for someone to run a new group covering its cardiology franchises. The other group includes businesses making orthopedic, diabetes, neurology and surgical devices, Medtronic said in a release.

"This new structure enables us to capitalize on existing synergies across our businesses," Chairman and Chief Executive William A. Hawkins said in a statement.

Shares of Medtronic recently traded down 55 cents, or 1.4%, at $38.12, although they've generally been on an upswing since March. The company, which is battling to stabilize its position in markets for key devices amid a slumping economy, has enacted job cuts and other moves in its restructuring efforts this year.

The "CRDM, CardioVascular and Physio-Control" group will contain Medtronic's big cardiac-rhythm business, which includes implantable defibrillators. It will also cover the business that makes stents to open heart arteries and Physio- Control, an external defibrillator business Medtronic would like to spin off once issues raised by the Food and Drug Administration are resolved.

Medtronic said it's currently conducting an external search for someone to run this new group. Segment leaders from the three businesses within the group - Pat Mackin, Scott R. Ward and Brian Webster - will report to that person.

Morgan Stanley analyst David Lewis called Medtronic's decision to search outside the company for this spot the "biggest surprise." Outside perspective has worked before, but the decision to not promote either Mackin or Ward "will come as a surprise to some investors," Lewis said.

"We are not convinced this sends any message regarding the outlook for these businesses," he added.

Christopher J. O'Connell, who had led Medtronic's diabetes franchise, was promoted to head the "Spinal and Biologics, Neuromodulation, Diabetes and Surgical Technologies" group. Catherine Szyman, formerly senior vice president of strategy and innovation, will now run the diabetes business.

Richard E. Kuntz, who had run Medtronic's Neuromodulation business, which includes "deep-brain stimulation" devices used to treat neurological disorders, was named chief scientific clinical and regulatory officer. Tom Tefft, formerly vice president and corporate controller, will take over the neuromodulation unit.

In addition, Jean-Luc Butel was promoted to a new position overseeing international operations.

Last week, the company reported its fiscal first-quarter profit dropped 38%, weighed down by charges from a recent legal deal, but core earnings and sales beat expectations with help from extra time on the fiscal calendar.