Other Than That, Boston Scientific, How Was Your Day?

After the third quarter, I pointed out that Boston Scientific (NYSE: BSX  ) should be grateful for its early-2006 purchase of Guidant. In the fourth quarter? Not so much.

The pacemakers and defibrillators that Guidant contributed are still growing strong -- they were up 5% year over year -- but the company had to take a whopping $2.7 billion goodwill writedown because the value of what it purchased has changed. That's 10% of the purchase price wiped away. Boston Scientific blamed changes in market demand for the implantable devices and disruptions in the credit and equity markets.

In the end though, it's just an accounting issue, like the monster charge Time Warner (NYSE: TWX  ) took after it merged with AOL or, more recently, the $3.3 billion charge SUPERVALU (NYSE: SVU  ) was forced to take. This charge doesn't affect today's cash flow statement, which is good because Boston Scientific can use all the cash it can get -- it still has $6.7 billion in long-term debt after the Guidant acquisition.

Sales of stents -- the company's other major product line -- fell 4% for the quarter and 8.6% for the year as Abbott Labs' (NYSE: ABT  ) new drug-eluting stent, Xience, managed to grab 30% of the U.S. market in the quarter. Boston Scientific sells the exact same stent with a different name on the box -- Promus -- but it doesn't get as much from those sales because Abbott gets some royalties. Still, Promus is certainly saving Boston Scientific -- just look at how hard sales of Johnson & Johnson's (NYSE: JNJ  ) stents fell. Sales of Promus now essentially equal that of Boston Scientific’s older Taxus stent in the U.S., and I expect that the Xience/Promus combination will continue to eat into the market share of Johnson & Johnson and Medtronic (NYSE: MDT  ) .

For this year, Boston Scientific is expecting to have sales growth of negative 1% to positive 6%, as reported. Lowered costs should help the bottom line increase more, with a 7% to 20% increase in adjusted earnings per share this year to $0.80 to $0.90. That gives it a forward price-to-earnings ratio of right around 10, which seems reasonable given the turnaround that it looks like Boston Scientific might just pull off.