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New CEO Attempts to Achieve Delicate Balance

BY VITA REED

Scott Garrett never got to meet Arnold Beckman. But the newly minted chief executive of the company Beckman founded some 70 years ago calls the late scientist and entrepreneur a role model.

Beckman, who died last year at the age of 104, was a model for doing “things that you enjoy and enjoying what you do,” said Garrett, a few days after officially becoming chief executive of Fullerton-based Beckman Coulter Inc. recently.

Beckman’s philosophy “makes life a very, very pleasant trip,” he said.

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The outlook could come in handy for Garrett, a 55-year-old Milwaukee native and Lemon Heights resident who recently replaced retired John Wareham.

Garrett has to navigate a delicate balance Beckman’s faced for several years , continuing to grow its dominant clinical diagnostics business, which sells products to laboratories running tests for doctors, while nurturing a turnaround in sales to drug makers and medical researchers at the company’s biomedical research division.

Beckman sells more than $2 billion of testing gear to hospitals, medical laboratories and academic research institutions yearly.

In 2004, clinical diagnostic sales, which made up 71 percent of Beckman’s revenue, were up almost 12 percent. Biomedical research sales were up 5.5 percent after crashing in late 2002, a situation that triggered a corporate reorganization.

The biomedical research unit is rebounding, though its growth is about half of what it was five years ago.


One Company

Garrett, in his low tenor voice, gently dismisses the notion of two separate Beckmans , the dominant, growing diagnostic business and the recovering biomedical side.

“What I’m going to try to establish for our employees, for our customers and our investors is that we’re really one company,” he said. “We apply our technology and our products to a lot of different markets. But everything we do is biomedical testing.”

That could be a hard sell to investors and others who clearly see the clinical diagnostic unit , which Garrett headed until 2003 , as the company’s driving force.

Of course, the issue could be moot if the biomedical unit resumes its role as the company’s growth arm alongside the workhorse clinical business.

That’s what Garrett said he expects: Biomedical “is very viable and I do expect that it will be back in double digits.”

“However, I think it’s going to be a more volatile market for us and we just need to know that going in,” he added.

The executive said he doesn’t see Wall Street’s reaction to Beckman’s fourth-quarter results, which disappointed some, as a trial by fire to his start as chief executive.

“Not especially,” said Garrett, who speaks collectedly with occasional smiles. “I’ve had almost three years to prepare for the transition. And I’ve been participating in conference calls for most of the last year and a half or so.”

Garrett was named to become chief executive on Jan. 21 and took up the post on Feb. 21, about three weeks after Beckman’s fourth-quarter results.

Had Garrett been chief executive at the time, he said he wouldn’t have warned Wall Street about the disappointing results beforehand. The company felt it was “well within our guidance and it would have been an overreaction to jump out ahead of our scheduled earnings release,” he said.

Beckman, which counted a market value of $4.4 billion recently, reported fourth-quarter earnings of $59 million, down 16 percent from a year earlier and off about 7 percent from what analysts had expected.

Sales for the quarter were $693 million, up 8 percent from a year earlier.

“We were able to describe the fourth quarter in a way that after some reflection and time to understand it, the analysts found it very positive,” Garrett said.

Beckman’s shares lost about 7 percent of their value after the results and since have gained back most of that ground.

What spooked analysts: Beckman’s lower profit margin during the quarter. Garrett chalked that up to more shipments of testing gear than reagents , testing supplies that make up half of sales, a good chunk of profits.

Reagents are to Beckman what ink cartridges are to Hewlett-Packard Co.’s printer business.

“Big numbers of instruments is great news, because it means you are winning market share,” Garrett said. “However, the very short-term effect of more instrument sales is lower margins because reagents are at a higher level of gross profit.”

Beckman’s also telling analysts that big buying by health-care networks and hospital groups makes the business harder to forecast, Garrett said.

“We’ve been pounding away about the lumpiness of the orders,” he said, laughing.

For growth, Beckman is looking to new products such as its UniCell DxC 600 and 800, two chemistry-analyzing machines that can do more tests faster with less technician time. It also is introducing new tests for conditions such as anemia, Garrett said.

As for acquisitions, Beckman is “screening opportunities all the time,” Garrett said. “When we find the right business at the right price, we’ll be making acquisitions.”

Garrett came to Beckman in 2002 as president of clinical diagnostics, succeeding Albert Ziegler, who retired. Garrett became president and chief operating officer in 2003.

His appointment as chief executive was widely expected. Beckman had disclosed in regulatory filings that Wareham was going to retire this year.

“Jack is still around,” Garrett said. “I expect that he’s going to be spending some time trying to get his handicap down where he could brag about it. And that’s going to take some time.”

Garrett’s also a golfer.

“I will be looking to Jack for advice certainly quite often over the next year or two,” he said.

Earlier in Garrett’s career, he headed Garrett Capital Advisors, a private equity firm that focused on leveraged buyouts.

He spent some 20 years at Baxter International Inc., a Chicago-area medical products company. He was chief executive of Dade Behring, a Beckman rival that evolved out of Baxter in the mid-1990s.


Vita Reed writes for the

Orange County Business Journal.

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