Acuson growth slows in tight market

A research report released this month by Wall Street securitiesfirm Morgan Stanley reduced income and sales growth projectionsfor radiology ultrasound leader Acuson. Despite market sluggishness,however, the vendor maintains a bottom line that most companieswould envy.

"Based on conversations with management, competitors,physicians and hospital administrators, it seems clear that 1992may be a difficult year in the ultrasound market," said analystPaul A. Brooke. "Share gains will probably be more difficultas Acuson's competition becomes more desperate and hospitals remainuncertain about their capital spending capacities."

Morgan Stanley reiterated its buy recommendation for Acusonstock, noted Robert J. Gallagher, Acuson CFO. Annual revenue growthprojections over the next three years were cut from 25% to 20%,which remains robust.

Increased R&D expenditures, however, should result in adrop in income growth for the company from 20% to slightly over10% in 1992, the report said. Income growth is projected to returnto the 20% level in 1993 and 1994 (see graph).

"This (report) reflects not only the higher commitmentto research and development that we intend to implement in thecoming years, but also the current market environment, which hasbeen in place for some time," Gallagher said.

Medical equipment customers, like most consumers, are hesitantto spend money as the economic recession stretches out, said SamuelH. Maslak, president and CEO. As a relatively inexpensive andversatile medical imaging modality, however, ultrasound is wellpositioned to maintain sales growth.

"As long as the recession is in place, the rate of growthof spending in the ultrasound marketplace will be slower,"Maslak told SCAN. "But I don't think there is any decreasein spending this year over last year, and I don't anticipate anydecrease in expenditures next year."

A 20% growth rate during a recession would be considered spectacularin most industries, he said. Ultrasound is actually well positionedto withstand and even benefit from changes in physician and capitalequipment reimbursement.

"Ultrasound is one of the least expensive of all (typesof) medical imaging capital equipment. It also tends to be thegreatest revenue producer. If what you want to do is make thehospitals more cost-effective, they can invest less money andgenerate more revenue (with ultrasound)," Maslak said.