Process/Metrology/Motion Stock Index up over 6%

Instrument Business Outlook, Nov 30, 2006

For the third consecutive month, all three US stock indexes grew, maintaining the Dow Jones' all-time high of above 12,000 on November 17. Early in the month, crude oil prices were impacted by the threat of attacks on oil facilities in Nigeria. Prices fell slightly as the International Energy Agency cut its outlook for 2006 global oil demand, days before expectations of a mild US Northeast winter slowed heating demand, sending crude oil prices to a 17-month low around $56 per barrel on November 17. Prices crept up again, finally settling near $63 per barrel on the last day of the month.

There were a number of mixed signs this month regarding the health of the US economy. On November 2, the Labor Department reported 327,000 new jobless claims for the week ending on October 28, well above the forecasted 310,000. However, the following day, the reported October unemployment rate fell to a 5-1/2 year low at 4.4%, down from 4.6% in September. The Department noted that 92,000 jobs were added in October, below the predicted 125,000, but more than offset by stronger than expected hiring in September and August. Stocks were boosted on November 16 by a report indicating that October core consumer prices rose a modest 0.1%. However, the Dow Jones took its largest hit in months on November 27 after weak Wal-Mart sales on the day after Thanksgiving triggered concerns about Christmas consumer spending and sent the market down 1.29%. Good news finally came on November 29, when the Commerce Department revised its third quarter GDP estimate from an annual rate of 1.8% to 2.2%. Inflation reports fell in line with expectations, suggesting that the Federal Reserve may begin lowering interest rates.

The NASDAQ topped the three US Indexes for the fourth straight month, gaining 2.7% to 2,431.77. The Dow Jones and S&P 500 improved 1.2% and 1.6% to 12,221.93 and 1,400.63, respectively. For the year, the Dow, S&P and NASDAQ are up 14.0%, 12.2% and 10.3%, respectively.

The three IBO Indexes were mixed this month. The Process/Metrology/Motion Instrumentation Stock Index was up 6.3%, the Laboratory Instrumentation Stock Index was up 1.0% and the Lab Consumables/Equipment Stock Index slipped 1.2%. Fisher Scientific International was removed due to the Thermo Electron merger (see IBO 11/ 15/06) and Biacore AB was removed after its purchase by GE (see IBO 6/ 30/06).

Laboratory Instrumentation Stock Index

This month, the Laboratory Instrumentation Stock Index inched up 1.0% to close at 535.19, with 12 companies improving, 8 declining and Waters unchanged. SEQUENOM showed the strongest growth for the second month in a row, jumping another 52% in November, followed by a 28% gain in shares of CombiMatrix. However, shares of Transgenomic and Illumina lost 14% and 13%, respectively.

With just one month remaining in 2006, the Laboratory Instrumentation Stock Index has climbed 18.7%, with 14 companies gaining and 8 losing, Illumina and SEQUENOM have soared this year, climbing 173% and 161%, respectively. Transgenomic and Affymetrix round out the bottom of the Index, dropping 59% and 47%, respectively.

This month, Am Tech/JSA Research upgraded shares of Thermo Electron to a "Buy" rating on November 11, while Lehman Brothers initiated coverage on shares of Beckman Coulter at a "Equal-weight" rating on November 20. Calendar-year third quarter reports also impacted Index stock prices. Beckman Coulter improved 3.1% on the first day of the month after the company reported third quarter earnings of $0.74 per share, beating estimates of $0.66 per share (see page 12). The same day, Mocon reported third quarter revenue growth of 17% and earnings growth of 63%, sending shares up 12.0%. After the bell on November 1, Varian reported adjusted fiscal fourth quarter earnings of $0.58 per share, beating analysts' estimates of adjusted earnings per share of $0.52. Despite better than expected fourth quarter and year-end results, shares slipped 2.4% the next day. Finally, Cepheid announced a wider third quarter loss of $0.07 per share after the bell on November 2, beating analysts' forecasts of a $0.11 per share loss, sending shares up 7.2% over the next two days.

SEQUENOM shares improved 5.4% on November 6 after a report of UCSD's use of the company's MassARRAY system in an analysis of microbial evolution. After the bell on the same day, PerkinElmer announced a plan to repurchase 10 million common shares over the next four years, sending shares up 3% the next day. On November 13, Bio-Rad Laboratories completed its purchase of Ciphergen Biosystems' life science research business, leading shares of Bio-Rad to improve 2.2%. The same day, Illumina agreed to purchase Solexa for approximately $600 million (see IBO 11/15/06), sending shares of Illumina down 11.7%. Three days later, Ciphergen exchanged $27.5 million of its outstanding 4.5% notes for $16.5 million in 7.0% notes and $11 million in cash, sending its shares down 7.3%.

Process/Metrology/Motion Instrumentation Stock Index