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"Abbott is a global, broad-based health care company that develops, manufactures and markets pharmaceuticals and medical products, including nutritionals, devices and diagnostics.

"The company employs more than 68,000 people and markets its products in more than 130 countries.

"The company recently released new data, showing that a combination of its new TriLipix triglycerides medicine and a low dose of AstraZeneca's Crestor cholesterol drug are better than the individual pills for treating heart problems.

Advanced Medical Optics (NYSE: EYE) manufactures and sells a variety of medical devices used to correct vision problems. Its cataract/implant products include artificial lenses used to replace human lenses, plus instruments and systems employed during the implantation surgery. Its laser systems are used in a variety of FDA-approved vision correction procedures. Its eye care product line features contact lens care solutions.

The company pleased investors earlier in the month, when it reported a Q1 loss of three cents per share and revenues of $304.6 million. Analysts had been looking for a loss of six cents and $287.4 million. Management also guided FY08 EPS to $1.25-$1.45 ($1.37 consensus) and FY08 revenues to $1.22-$1.24 billion ($1.22B consensus).

MAJOR PAPERS:

• According to the Wall Street Journal (subscription required), NYSE Euronext Inc (NYSE: NYX) is investigating the trading of ABN Amro Holdings NV (NYSE: ABN) shares in March when it announced it may sell itself to Barclays plc (NYSE: BCS).
• Barron's (subscription required) "Inside Scoop" column reported that hedge fund ValueAct Capital Partners has boosted its stake in Advanced Medical Optics Inc (NYSE: EYE) to 12.6%, up from 9.9% disclosed at the beginning of June.
• The Financial Times reported that Citigroup Inc (NYSE: C) is not going to reduce its financing of buyouts in the near future, said Citigroup CEO Chuck Prince.
• Spanish telecom company Telefonica SA (NYSE: TEF) has made a EUR3B-plus offer to Portugal Telecom (NYSE: PT) for exclusive control of Vivo Participacoes (NYSE: VIV), reported the Financial Times.

• Australian mining company BHP Billiton Limited (NYSE: BHP) has opened talks with private equity firms about a possible $40B takeover of aluminum company Alcoa Inc (NYSE: AA), reported the UK Times.

Advanced Medical Optics Inc. (NYSE:EYE), which has grown through acquisitions for years, now may become a buyout target itself once its bid for Bausch & Lomb Inc. (NYSE:BOL) fizzles because of the recall of its MoistureLoc contact lens solution.

Piper Jaffray & Co. analyst Mark Mullikin raised a good point about the recall in an interview with Bloomberg News.

"The recall increases their financing costs,'' he said. "I don't know that Advanced Medical shareholders will be willing to swallow that, and Bausch & Lomb shareholders are less likely to want to take Advanced Medical stock as part of the deal.''

Advanced Medical, which got about 11% of sales from the recalled cleaner, wouldn't be able to top Warburg Pincus LLC.'s $3.67 billion, or $65 a share, offer for Bausch & Lomb without without using stock since its market cap is smaller than its rival.

Shares of the Santa Anna, Calif.-based company plunged on news of the recall. Advanced Medical also withdrew its forecast calling for profit excluding costs of $1.40 to $1.55 a share this year.

The company has painted itself into a corner that it can only get out of with a white knight of its own.

If the merger makes as much as much sense as some on Wall Street suggest, why wouldn't Warburg or another buyout firm snap up both companies?

Last week, Advanced Medical sounded a more optimistic tone, saying a deal with Bausch & Lomb made sense "given the complimentary nature of our two businesses."

But that was then and this is now.

Whether your eye care requirements involve an artificial lens implant, corrective laser surgery, or just some contact lens solution, there is an outfit in Santa Ana, California that makes what you need.

Advanced Medical Optics (NYSE: EYE) manufactures and sells a variety of medical devices used to correct vision problems. Its cataract/implant products include the artificial lenses used to replace human lenses, plus instruments and systems employed during the implantation surgery. Its laser systems are used in a variety of FDA-approved vision correction procedures. Its eye care product line features contact lens care solutions. The firm is expanding, having acquired laser correction rival IntraLase last month. Bausch & Lomb (NYSE: BOL) is a major competitor.

The company pleased investors last week, when it reported Q1 EPS of 23 cents (ex-items) and revenues of $251.7 million. Analysts had been looking for 16 cents and $243.1 million. Management also guided FY07 EPS to $1.40-$1.55 ($1.44 consensus) and FY08 EPS to $2.25-$2.40 ($2.18 consensus). Although IntraLase numbers were not included in the Q1 results, the firm noted that its acquisition's first quarter sales grew 30%, to about $39 million. EYE shares popped on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with one "strong buy," five "holds" and two "sells." Analysts see a 55% growth rate, through the next year. The EYE Price to Sales ratio (2.39), Price to Cash Flow ratio (15.10) and Operating Margin (21.29%) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $32.71 and $52.90. A stop-loss of $35.90 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.