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May 16, 2004

Cochlear plans to fight back

From: The Australian - Australia - May 16, 2004

By Chris Moriarty
May 16, 2004

CHRIS Roberts knows all about pain: he's been on a six-month crash course.

On November 25 last year, Roberts was triumphant, having been made CEO of Cochlear, then a $1.6 billion global poster child for Australian ingenuity.

Only a month earlier, departing CEO Jack O'Mahony had delivered an upbeat report. "The potential market for the Cochlear device is boundless," he said. "All the ingredients are in place for us to achieve our potential."

Roberts, a respected industry veteran, must have been confident. But within days, before he'd even had a chance to find the washroom and learn the names of his personal staff, the president of Cochlear's US operations resigned without notice and jumped ship to the opposition.

Then Roberts must have learnt that the half-year results, due to be released within days, would be very unimpressive. There was also a restructure in the pipeline, complete with redundancies.

Next, the US Department of Justice issued a formal request for information against the company.

"It is understood that Cochlear Americas is subject to an inquiry under federal health-care laws in the US that deal with the Medicare and Medicaid programs, including some with potential criminal sanctions," it wrote.

Cochlear Americas is the wholly owned division from which the US executive had suddenly resigned.

Roberts' horror run has seen more than half a billion dollars wiped from Cochlear's value, and rumours abound that staff morale is at an all-time low.

But there's some good news: the federal Budget included $8 million specifically for Cochlear products over the next four years.

That's a drop in the ocean for Cochlear, but "a signal that governments are starting to realise the potential of the technology," says Cochlear's Neville Mitchell.

A single ray of sunshine during a bleak winter can signal a turnaround.

"It has been a difficult year," Mitchell admits. "But we're just trying to get on with the business, making sure all the pieces are in place.

"Cochlear is a strong business. We're still profitable, we have cash, and our people do work in a rewarding industry, so morale will hold."

Cochlear has around 65 per cent of the global market share in the ear-implant business. Its nearest competitor has just 20 per cent.

Cochlear's products are sold in more than 80 countries, and all manufacturing (and most of its research work) is done in Australia.

Chris Roberts now has his chance to sort the company out and get it back on track.

© The Australian