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Intuitive Surgical [ISRG
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] makes a robotic surgery system called da Vinci, used for hysterectomies and prostate surgeries, that fetches upwards of $1.7 million. The problem is that hospitals in this economic environment no longer have that kind of money to kick around. And without buyers, this company is in big trouble.
Just look at the numbers: According to the American Hospital Association, 43% of hospitals expect further losses. Since the beginning of 2008, 77% have reduced capital spending, while 54% have stopped future projects. Weighed down by debt, receiving fewer charitable donations and most likely cutting their budgets even further, hospitals are in no position to buy Intuitive’s da Vincis.
The company knows this, too. Its made-to-order machines once offered great earnings visibility. But a lack of orders offers a different kind of outlook, which might explain Intuitive’s decision to suspend 2009 earnings guidance. It’s probably best for Wall Street to know as little as possible right now, so the company is keeping things close to the chest.
One final point to consider: Intuitive has reached near market saturation. Sixty-three percent of Tier I hospitals own da Vincis, and the machines accounted for 81% of all prostate-removal procedures in the US last year. A shift to more hysterectomies wouldn’t help much, either, as the per-surgery revenues made from one-use parts generate $500 less than those from prostate surgeries. The ride, it seems, is over for ISRG.
Cramer also took the time on Thursday to update viewers on some of his previous calls. Watch the video for the last on Intel’s [INTC
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] bid for Wind River Systems [WIND
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], Axsys Technologies [AXYS
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] and for-profit education companies like Strayer [STRA
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].
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