Boston Scientific (NYSE: BSX) is a company in trouble. It spent too much for medical device company Guidant, leaving it with $8.3 billion in debt. And sales of its drug-coated stents have been hurt by clotting problems. The company lost $272 million in the last quarter.
The combination of high debt and poor earnings has done a great deal of damage to the stock. The company's shares are down about 22% this year.
Boston Scientific has come up with a simple plan, which is to sell itself off in pieces until its debt comes down to a level that it can service. Today, the company sold its cardiac surgery and vascular surgery units for $750 million. The buyer was Getinge, a Swedish company. The two units were part of Guidant.
The announcement is another example of the hideous cycle that begins when companies overreach. From late 2003 to early 2005, before BSX bought Guidant and took on mountains of debt, its shares moved from $13 to $35. Earnings were strong and shareholders were happy. But BSX management could not resist buying another medical device company and got into a brutal bidding war with Johnson & Johnson (NYSE: JNJ), which pushed the price of Guidant to an irrational level.
Now, Boston Scientific can sell off what it bought, but probably at a lower price.
Douglas A. McIntyre is an editor at 247wallst.com.
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