Investors got an early-morning present from Intuitive Surgical
The maker of robotic surgical systems introduced a new model this month. The system has a sharper image, so surgeons can better see what they're working on. The new setup can also include a second console, which should facilitate teaching and complex procedures that might require two surgeons. In addition to sporting a higher list price, the new system should drive procedure growth, because it'll be easier to train new surgeons, and it may be possible to develop complex procedures that can't currently be done with just one surgeon.
To avoid upsetting 44 customers that ordered the best system available last quarter, Intuitive Surgical offered to sell them a discounted upgrade, which resulted in $20 million in deferred revenue.
In total, the company sold 66 systems this first quarter, compared to 74 in the first quarter of last year. While it's certainly not welcome, the drop isn't too surprising; medical device makers like Natus Medical
While system sales didn't produce the same crazy growth we've seen in the past, the same couldn't be said for the revenue derived from the machines once they're installed. Instrument and accessory sales were up 28.6%, and revenue from service contracts grew by 44.3%, thanks to the increased number of installed instruments compared to a year earlier and the 60% growth in procedure volume. Much like Microsoft's
This will clearly be a tough year for the Rule Breakers recommendation, and almost everyone else for that matter, but the company should make it through O.K. Once hospitals are no longer so worried about their budgets, it might even see some pent-up demand.
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