Dueling Fools
VISX Lessons
September 15, 1999
The Bear Rebuttal
By
I'm happy for my buddy Barbara. How can I not be? But as successful as her surgery must have been, I wonder why she still doesn't see the point. She is an early adopter. You know the type. They're forking over $5,000 for a high-defintion television set right now. They were the ones who bought the $1,000 microwaves and VCRs. Sure, better and cheaper will be coming around the bend, but some folks open their wallets for the honor of claiming first wave prototypes.
That's great. Corporate America loves its guinea pigs. It also loves that it can take those pioneer numbers and extrapolate them as constant to justify research and development (R&D) funding. But the reality is that nobody is expecting VISX to continue to take in $250 per procedure once the competition rolls in and the prices become reasonably mainstream.
My bullish chum singling out millionaire athletes does little to derail how elitist the process is until the prices drop. Then again, after seeing Wade Boggs's play deteriorate these past few seasons, and catching San Francisco get demolished over the weekend, maybe these aren't the best of endorsements for VISX.
Still, beware of assuming that the initial payouts are sustainable. We've seen folks fall into this trap. Remember Iomega <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %>?
Every reason Barbara noted in VISX's favor -- from plump gross margins and market share to a stellar growth rate -- will fade, as will the company's over-ambitious $6 billion market capitalization.
She raves about a procedure. She should not be raving about the name on the machine. Patents or not, the companies willing to train and provide for less have arrived and VISX will be hard-pressed to ignore the rush.
Ultimately my worthy Fool is correct. It's all about knowledge and money. The more you know, the less you'll lose in VISX.
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