Novice Investing - Guidant Lacks Guardian Angel

Date: Thursday 20th 2008f November 2008 05:58:43 AM

Guidant Lacks Guardian Angel - 12/27/2005

By: Novice Investing Staff

Guidant Corp. (GDT) stumbles anew today. FDA is giving the company a letter of warning regarding its facility at St. Paul, Minnesota. Just last Friday, the company warned that earning expectation is too high.

The company has been receiving plenty of bad news lately. It began with Johnson & Johnson's intention to acquire the company back last spring. Then, on June, it issued product recall for its stent product due to malfunctioning. This prompts J& J to look at the whole deal and say, ' Hey. I do not want to pay you that much for a company with stent recall.' Another recall put the deal in jeopardy. Finally, the big J decided not to pursue the deal with Guidant anymore.

Don't feel bad for Guidant. Another suitor, Boston Scientific Corp. (BSX) bid a price for Guidant despite the product recall. True love is when a person can accept that other person for whatever they are, right? Boston Scientific shows true love by announcing that it will continue with the deal to buy Guidant despite the latest FDA's letter of warning. However, patience has its limit. If bad news leak out of Guidant, we are wondering if Boston Scientific will follow the path of Johnson & Johnson. Boston Scientific is quite patient thus far. Its patience will be tested here.

Guidant is not the new kid in the block. It has a solid balance sheet with $ 2.7 Billion of positive net cash. Furthermore, it is still expected to be profitable despite the stent recall. This will gives Boston Scientific comfort. Both Guidant and Boston Scientific are on the same field. Acquiring Guidant will solidify Boston Scientific's position. If no terrible bad news occur, we believe that the offer will not be rescinded.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Guidant Corp. (GDT) or any other securities.

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