Post of the Day
October 20, 1999

Board Name:
VISX, Inc.

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Subject:  A Cautionary Note
Author:  davidhu

With all the enthusiasm about VISX and the company's stellar growth, I thought I would inject a note of caution. I am not long or short on the stock; I haven't owned it mainly because I don't want to accumulate too many stocks in my portfolio. I am a physician and have had the LASIK procedure done with a VISX laser and am satisfied with the results.

However, anybody who predicts unlimited growth for this company needs to take into account the following factors. First of all, the procedure is still expensive - in the neighborhood of $4000 for both eyes - and as time goes on, it is likely that the number of people willing to pay these prices will decline. While I expect prices to drop, the licensing fee that VISX charges and boasts as a good source of income limits the ability of ophthalmologists to cut prices. There are other laser manufacturers and industry competition may eventually drive prices down to a range where a large percentage of the public can afford the procedure.

I think this would have to be in the range of $1000 to $1500 for both eyes, where the cost of a few pairs of glasses is about the same as the LASIK procedure. Otherwise, after people who can pay the high fees have had their procedures, there may not be a large number of new customers. If prices are lower, profit per customer may be lower (depending on how expensive future lasers are to produce).

Secondly, the procedure is not without risk and some people get bad results. Even people like me who have had excellent results (20/15 vision in both eyes, no astigmatism left) often have some optical aberrations due to the nature of LASIK. I have mild starbursts and halos which fluctuate at night and are only mildly annoying to me but may really irritate someone else. My son, who was more nearsighted than me has more pronounced symptoms and is not that happy with his LASIK even though his vision tests out at 20/20. Because I am middle-aged, I still have to wear reading glasses.

I think, that realistically, after the initial wave of people who are not risk-averse have had the procedure, there will be a large group of nearsighted (and now far-sighted) people who won't want to take the risk of the procedure or who won't have it because they have presbyopia and will still need to don reading glasses to get through the newspaper. (Some people have one eye undercorrected giving so-called monovision where they can read without reading glasses but given the latitude for error in the procedure, this may not work as well as intended.)

In conclusion, I think that the cost of the procedure and the likelihood that a large group of people with refractive errors will be afraid to have it done will put the brakes on the growth of VISX faster than many investors or the CEO of the company expects. I think this is a good investment but only the Wise would think that the market for the LASIK procedure is unlimited.