Zimmer Fortifies Its Spine

It looks like Zimmer (NYSE: ZMH) is going to have a little more spine as it competes with Medtronic (NYSE: MDT), Stryker (NYSE: SYK), and Johnson & Johnson (NYSE: JNJ). The medical-device maker is buying Abbott Labs' (NYSE: ABT) spine business for $360 million in cash.

The division, which registered $109 million in revenue in 2007, will increase Zimmer's spine sales by about 55%. It won't, however, add anything to the bottom line in the immediate future. In fact, Zimmer expects the deal to cost it $0.03 per share this year, and $0.08 to $0.10 per share the following year. It hopes to get back to even on the deal in 2010.

Over the first six months of the year, sales of spinal products were just 5% of Zimmer's sales, so we're not talking about a major addition. Indeed, orthopedic implants are still going to dominate the company's sales. But in the long run, the added products from Abbott should help the company make better use of its sales force.

For Abbott, the sale isn't all that unexpected. The company looked like it was trying to turn itself into a pure pharmaceutical company with the attempted sale of its diagnostic-test division to General Electric (NYSE: GE) last year. Overall, the new deal looks like a good move for both companies, although not one that will have a huge impact on either.