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URL:  http://boards.fool.com/denny-thanks-for-your-thoughtful-reply-i-may-have-23804587.aspx

Subject:  Re: Denny Date:  3/8/2006  8:24 AM
Author:  TAR12 Number:  26316 of 74338

Denny

Thanks for your thoughtful reply. I may have spent too much time analyzing ISRG, but the business concerns are not that much of a barrier to me. I am considering adding to my position (in at 40 last year). As to some of your concerns regarding price--this is not a barrier to sales; institutions such as hospitals will pay anything for equipment, and for those institutions that have surgeons asking for something--they spend the money. Additionally, the hospitals in major cities are competing to have these machines and are beginnning to advertise them. Additionally, the adoption rate of the technology is surprising to me-- almost 1 in 5 of the radical prostectomies (sorry if the procedure is misspelled) in 5 years? My only problems so far have been trying to determine the rate of recurring sales growth in relation to the installed base, but even if recurring revenue grows in direct line to installed sales, the growth is phenomenal-- but I believe that the recurring revenue will grow at a greater rate.
The forward P/E is hard to guess, but I think the increased revenue from sales will keep the forward P/E in line with present, despite taxes. Although seemingly high, the company still has 5X growth to corner the prostate market, with other surgical procedures to come on line in the next five years it will be interesting to watch.

Even with that said, I can see the share price drop after a slow 1st quarter earnings release. Following that, the next three quarters will surprise. Only time will tell, but 70 may be a better target after the next earnings release.

Thanks for FMD- I agree with your analysis on this as a purchase now, and will be looking to change some positions in May, and this is one that has been on my watch list since the discussions. Moreover, the politics of educational finance will push even more of the cost onto students backs and tuition will rise even more- the cuts to grants to students and the cuts to university funding are real, and likely will not be replaced in the near term. I see new lawyers coming out of school with 6 figure sl debt. FMD will grow, and their service is invaluable (banks do not want to do the work--outsourcing is the trend and it won't go back.)

Take care, and thanks again for your thoughts.

T. Allan

BTW, if you keep an eye on growth opportunities, watch for biotech SNMX at the end of 06 early 07 when they start recieving dollars from their product in commercial use.


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