Visx Says It May See Loss in 4th Quarter
Visx Inc., the largest maker of vision-correction lasers, on Tuesday said it may have a fourth-quarter loss as the slowing economy reduces demand for elective eye surgery.
Visx expects to earn 15 cents to 17 cents a share, and anticipates taking a charge of $18 million, or 18 cents a share, to increase reserves to cover accounts receivable. The charge would give Visx a loss of as much as 3 cents a share. The company was expected to earn 20 cents, the average estimate of analysts surveyed by First Call/Thomson Financial.
The warning sent shares of Santa Clara, Calif.-based Visx down $3.19, or 26%, to close at $9.31 on the New York Stock Exchange.
The company’s primary source of revenue is a $100 licensing fee it charges doctors each time they use a Visx laser. Visx said the slowing economy is causing some patients to put off a laser surgery procedure, known as Lasik, which can cost $500 to $2,500 per eye and isn’t covered by many health insurers.
“Lasik is an elective procedure, the vast majority of which are not covered by direct insurance policies,” A.G. Edwards & Sons analyst Tim Dwyer said. “Human nature is to defer large-ticket purchase items in a slowing economy.”
Visx said it’s likely one or more of the laser vision correction centers that use its products won’t meet financial obligations.
“If we do increase our reserves, it will have a negative effect on earnings,” company spokeswoman Lola Wood said. She would not identify the businesses that were having trouble paying Visx. “It’s a variety, not any single one.”
Visx, which had about 65% of the vision-correction market in October, has been losing ground as rivals Bausch & Lomb Inc. and Alcon Laboratories Inc., the eye-products unit of Swiss food maker Nestle improve their lasers.
Visx has had to cut prices to meet the competition, said McDonald Investments Inc. analyst Hans von der Luft.
“This company is driven by growth in laser vision-correction procedures,” Von der Luft said. “Within the last few weeks, a couple of laser center locations reported a slowdown in the quarter. Some of this is due to slowing in the economy.”
Visx is expected to announce full results Jan. 17.
Von der Luft, who has a “hold” rating on Visx shares, said he had expected sales growth of 4% to 5% for Visx in the fourth quarter over its third-quarter performance. Now he says the sequential sales may have decreased. The company didn’t provide related data in Tuesday’s announcement.
Visx’s largest customer, Laser Vision Centers Inc. of St. Louis, said it’s current on all payments to Visx.
“We want people to understand we’re doing fine,” Laser Vision Chief Executive Jack Klobnak said. “There are some companies that are charging prices for the surgery that are, in our opinion, below the cost of doing the procedure.”
Earlier this month, financier Carl Icahn, who holds a 9.95% stake in Visx, said he would nominate his own slate for board of directors at the company’s 2001 annual meeting to press his effort to have Visx put itself up for sale.
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Cloudy Vision
Visx, which dominates the vision-correction laser market, has been losing ground as rivals such as Bausch & Lomb and Alcon improve their products. Combine that with slackening demand for elective eye surgery and the company sees a possible loss in the fourth quarter. Shares have fallen 82% this year.
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Monthly closes and latest for Visx (ticker: EYE) on the New York Stock Exchange
Tuesday: $9.31, down $3.19
Source: Bloomberg News
