Failing to achieve sizable results despite all efforts can be a huge frustration. The management of Boston Scientific Corporation (NYSE:BSX) is finding itself in a similar quagmire.
The company reported second quarter earnings on their website on July 26 and their stock, which was already tumbling, took another significant dip, reaching a brand new 52-week low that earned BSX a downgrade from Outperform to Market perform by Northland Securities analysts. The bottom line is that the situation is not pretty at all. The performance of BSX’s Europe, Middle East and Africa (EMEA) unit was so poor that the company had to slash its goodwill by approximately $3 billion – a third of the total goodwill for all markets and more than 75% of the EMEA goodwill. BSX is making adjustments to its projected performance over 2012 as a whole and is expecting a further shrinking in sales.
A large amount of BSX sales are comprised of their cardiac rhythm management (CRM) products and management is seeing potential trouble in the future, with a $56 million drop of CRM sales in Q1 of 2012 as compared to 2011. Despite their recent acquisition of Cameron Health, a company developing innovative implantable defibrillators, the prospect of an increase in sale volume is nowhere in sight.
There is also the matter of insiders shedding BSX stock as though it was a pesky bug. Company founders Peter M. Nicholas and John E. Abele (currently Director and Director Emeritus, respectively) have been cashing out shares in significant volumes over the last few years and are still doing it at a steady pace in six-figure dollar amounts, despite the failing share value.
CEO William Kucheman’s pay is also an item of curiosity. His total compensation for 2011 reported in a proxy statement is over $4 million. That looks like a generous slice for an executive who seems to be steering the company into the dreaded reefs of stagnation.
While investors with BSX shares on their hands may be confused as to what to do next, it looks as though the company is waist-deep in the bog. Future improvement may come from developing competitive solutions and not hinting that slower sales are due to lower heart failure rates.
