This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Lucky for Arterial Vascular That It Sold to Medtronic When It Did

The Thursday Thud:

  • Don't have a coronary: Exquisite timing. That's the only way to describe Arterial Vascular Engineering's, or AVE's, recent sale of itself to Medtronic (MDT). Late Tuesday, Medtronic disclosed that fiscal third-quarter revs from AVE's coronary stent biz would be below expectations. You can only imagine had AVE been forced to make that announcement while it was still an independent company.

    "The stock realistically could've been cut in half," says Warburg Dillon Read analyst Matthew Dodds, a Medronic bear. Instead, AVE is now part of a company whose stock price, at 75, reflects a slide of a mere 7%.

    The knock on AVE here and elsewhere had been that its U.S. stent biz was bound to slow as competition increased. Somehow, however, AVE always managed to beat the Street as the stent biz boomed.

    Then came the sale to Medtronic, which was completed several weeks ago. Then came the (some would say long-awaited) disappointment.

    Did AVE execs sell (in the nick-of-time) while the selling was good? Dodds thinks so, but Medtronic officials insist they bought the stent biz for the long term, and blame the miss largely on AVE's sales force being distracted by the deal. Medtronic CEO Bill George tells me he believes it will be viewed, in retrospect, "as a quarter blip on a screen." Maybe so, but AVE's sales came in below even Dodd's $106 million estimate, which had been the lowest on the Street; in fact, they're expected to be less than $90 million.

    The real test, Dodds says, will come next quarter. If sales are light again, then the question will be whether we're in the "bl" the "eh" or the "puh" of the blip. (Full disclosure: plagiarizing myself; used that blip line before on Applied Materials (AMAT), but it's too good not to use again.)

  • Dinging Dell -- or for those who are not yet Delled out: Last March, (JAVLX) fund's Scott Schoelzel was quoted here explaining why he liked Dell (DELL), which then was trading at around 30. Putting his money where his mouth is, Janus Twenty became one of Dell's largest holders. What's Schoelzel saying now? Yesterday he told me: "Needless to say, Dell kind of blew this quarter (by their own admission). The situation is very, very confusing and we have lots of differing opinions, even within our own shop.

    "Speaking only for myself, I am pleasantly surprised the stock is only down 8. I expected more pain. I also expect the company to be in repurchasing shares on Friday [after a 48-hour SEC blackout following earnings] and this will probably help stabilize the situation a little bit.

    "As for the fundamentals, it's controversial, but I believe they signed a number of corporate accounts in November and December, and they expected/projected certain volumes to ship to those customers in January. Simultaneously, they decided to keep pricing firm at the start of the new year, believing they had a pretty good read on the quarter (which is why gross margins were higher than most expected). Then, as January progressed (third week), it was clear that they had simply misjudged the early ramp rate of some of their newer corporate customers and it was too late to go back and lower prices, thus stimulating the incremental demand necessary to make the revenue line for the quarter.

    "Lot of 'ifs' and conjecture but I think this is accurate. They know they got off their game and I hope this reintensifies the effort out of Austin. I still believe the model is systemically advantaged vs. their competitors (six days of inventory vs. Compaq's (CPQ) 56, channel included) and they still grew units in excess of 50% for something like the 11th straight quarter!

    "Nevertheless, the bears will have plenty to chew on for a while. Still a good company, good management, but probably not a great stock ... for a while."

    Thanks, Scott. (Wouldn't say whether he has been a buyer, a seller or neither.) Dell won't comment on a possible stock repurchase, and says the rest of Schoelzel's comments are consistent with what it's been saying.
    Herb Greenberg writes daily for In keeping with the editorial policy of TSC, he does not own or short individual stocks. He also does not invest in hedge funds or any other private investment partnerships. He welcomes your feedback at Greenberg writes a monthly column for Fortune and provides daily commentary for CNBC.

    As originally posted this story contained an error. Please see Corrections and Clarifications.

    Check Out Our Best Services for Investors

    Action Alerts PLUS

    Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    Quant Ratings

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    Stocks Under $10

    David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    14-Days Free
    Only $9.95
    14-Days Free
    Dividend Stock Advisor

    David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Updates with exact steps to take - BUY, HOLD, SELL
    Trifecta Stocks

    Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

    Product Features:
    • Model Portfolio
    • Intra Day Trade alerts
    • Access to Quant Ratings
    Real Money

    More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

    Product Features:
    • Access to Jim Cramer's daily blog
    • Intraday commentary and news
    • Real-time trading forums
    Only $49.95
    14-Days Free
    14-Days Free
    AAPL $93.74 0.00%
    FB $117.58 0.00%
    GOOG $693.01 0.00%
    TSLA $240.76 0.00%
    YHOO $36.60 0.00%


    Chart of I:DJI
    DOW 17,773.64 -57.12 -0.32%
    S&P 500 2,065.30 -10.51 -0.51%
    NASDAQ 4,775.3580 -29.9330 -0.62%

    Free Reports

    Top Rated Stocks Top Rated Funds Top Rated ETFs