Greenberg: Taking the Scalpel to Intuitive Surgical
By: Herb Greenberg | 01/24/14 - 07:26 AM EST
SAN DIEGO (TheStreet
) -- Easy come, easy go. So goes the story of Intuitive Surgical (ISRG)
, whose shares leapt higher Jan. 14 after the company issued sharply higher fourth-quarter guidance.
Actual headline results, reported Thursday, were in line with expectations but
...the trouble, which has caused the stock to slump, was below the headlines.
Notably, the gross margin on product sales tumbled to 69.5% from 73% a year earlier. At the same time, inventories skyrocketed -- not a good combo. CFO Marshall Mohr blamed the lower margin on "expensing certain system production costs in light of lower system unit production."
Equally troubling, procedures are expected to "stabilize" in 2014, growing 9% to 12% but down from 16% in 2013.
Stabilizing or not, the company then lowered the boom: "Due to lack of visibility," it's not providing revenue guidance this year.
I'm not a fan of guidance, in general, but when a company withdraws it because it has no "visibility," it is never a good sign. (Yet another reason guidance is silly.) Intuitive's candor is admirable and noteworthy; at least its management isn't trying to bluff. It knows it faces a number of challenges related to health care costs and (while it doesn't come out and say it) growing concerns regarding the overuse
of its da Vinci. I lay out much of this in my CNBC
documentary The da Vinci Debate
. Until this is hashed out, Intuitive's reset continues. Robotic surgery isn't going away; to the contrary. But its hyper-growth days are likely over.
Correction: An earlier version of this story incorrectly said that the company's gross margin on product sales tumbled to 61% from 73% a year earlier.
-- Written by Herb Greenberg in San Diego