A rough look at how revenues and earnings can drop in 2000 from 1999:
Assuming VISX had at most 75% market share on about 1M U.S. procedures in 1999, they'll lose $150 per each of 750,000 base procedures going forward, or a loss of $112,500,000 in procedure fees, and will get only $100 per additional procedure. Assuming there are at most 1M additional U.S. procedures in 2000 and VISX gets at most 75% of those, that's an extra $75M in revenues. Therefore, VISX loses $112.5M and gains $75M, for a net loss of AT LEAST $37.5M, which, adjusted for taxes is an after-tax reduction in earnings of $22.5M, or $0.35 per share, assuming no increase in other earnings sources, and excluding the benefit of the share buyback, which would reduce shares outstanding by 15% max.
Therefore, if VISX does not generate enough earnings from other sources, like Japan (now open to VISX laser sales for myopia and possibly some procedure fees?), or new technology (wavefront measurement equipment?), it appears 2000 EPS can drop by at least $0.35 per share from 1999 levels, and at best, will be flat at $1.35+, again, assuming U.S. procedure volume doubles to 2M in 2000.
That seems in the ballpark. Feedback anyone? I'm definitely disappointed, and view this more as a deperation measure by VISX to protect its installed base even at the expense of earnings, rather than risk seeing laser after laser traded in for competing systems.
Note that this reduction will have a major positive impact on laser center earnings until continued price reductions offset the gains, which may make the upside short-lived. TLCV's corporate/vision plan volume discounts amount to at most $150 per procedure (if I recall from the last CC), which this fee reduction offsets, but the most aggressive new players, Lasik Vision and ICON plan to aggressively undercut everyone. Lasik Vision already plans to charge $1000 per eye, far below LCAV's $1500 per eye.
Didn't LVCI recently drop its exclusive relationship with VISX? ICON is buying Nidek's, and TLCV has made a $20M investment in LASE, while BEAM's systems sales are finally picking up....
The easy money run from 1997-1999 was fun.... |
