Medtronic Inc Chief Executive Officer William Hawkins plans to retire in April after a tenure of more than three years in which the medical device maker's stock performance disappointed investors.

Medtronic said on Monday that it had started an external search for the replacement of Hawkins, 56, who is also chairman.

Shares of Medtronic were up 1.1 percent at $37.80 in afternoon trading after rising as much as 5.7 percent after the announcement. Analysts pointed to the stock's poor performance during Hawkins' tenure and some questionable moves, including the company's $3.9 billion acquisition of spine-products maker Kyphon.

Jefferies & Co analyst Raj Denhoy said the CEO's departure was somewhat unexpected.

Certainly, people have been people have been disappointed with the stock's performance now for quite some time, said Denhoy. I know there are some investors that have questioned his decision-making and leadership.

An eight-year company veteran, Hawkins was named CEO in August 2007 and chairman in 2008. He intends to retire as chairman and CEO at the end of the company's fiscal year, which is April 29, the company said in a statement. Hawkins plans to remain until his successor is appointed.

A spokesman for Minneapolis-based Medtronic said Hawkins was retiring to pursue other challenges, declining to expand further.

The change in command at Medtronic follows several recent top executive switches at other large healthcare companies, including a long-surmised transition at Merck & Co and the abrupt departure earlier this month of Pfizer Inc's
CEO.

GROWTH WORRIES

The world's largest stand-alone medical device company, whose products also include heart defibrillators and pacemakers, has had a rough financial year.

As at its rivals, demand for Medtronic products has slumped as people who have lost jobs, or faced higher co-payments and deductibles in their health plans, postpone medical care.

Industry growth has slowed due in part to lack of innovation, Denhoy said. As the leader in many of those markets, he said, Medtronic is particularly under pressure.

Anyone who comes in (to replace Hawkins) is still going to face the same challenges, Denhoy said.

JP Morgan analyst Michael Weinstein said 62 percent of Medtronic's sales today are in businesses that are unlikely to grow and face pricing pressure over the next three to five years.

The question, of course, is what a new CEO can do for Medtronic? Weinstein said in a research note.

The industry bellwether reported a surprise drop in quarterly sales in August and cut its full-year profit forecast last month.

Since August 2007, Medtronic stock is down 26 percent, compared with a 15 percent decline for the broader S&P 500 index <.SPX>, said Wells Fargo analyst Larry Biegelsen, who noted several execution missteps during Hawkins' tenure.

We are encouraged by Medtronic's plan to bring in an external candidate, which we believe can bring fresh ideas and strategies to help reinvigorate the business and boost company credibility, Biegelsen said in a research note.

As of Friday, Medtronic stock traded at 10.2 times forward earnings estimates -- lower than any other rival in the S&P Health Care Equipment Sub-Industry index <.GSPMED>.

(Reporting by Lewis Krauskopf, editing by Gerald E. McCormick, Lisa Von Ahn, Dave Zimmerman)