All four IBO indexes follow market's decline

Instrument Business Outlook, June 30, 2008

The markets tumbled in June as the Dow Jones Industrial Average, S&P 500 and NASDAQ declined 10.2%, 8.6%, 9.1%, respectively. With rising inflation, record oil prices and a worsening credit markets, even the most optimistic Wall Street pundits dismissed any ideas about a quick recovery in the second half of the year. The high cost of oil, which ended the month at $140 a barrel, is putting a severe strain on consumers and corporations alike. On June 25, the Federal Open Market Committee announced it would hold interest rates at 2.0% despite concerns over high energy costs. Contrary to the Fed's intentions, the US dollar traded lower, while oil continued to climb during the month. It is evident that the Fed is caught in a complicated predicament and cannot raise rates without further damaging the economy, especially in the financial sector. Year to date, the Dow, S&P 500 and NASDAQ are all trading lower, falling 14.4%, 12.8% and 13.5%, respectively.

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Not surprisingly, all four of the IBO Stock Indexes traded lower in June, with the Lab Consumables/Equipment Stock Index declining the most, falling 6.6%. The Laboratory Instrumentation, Process/Metrology/Motion Instrumentation and Diversified Instrumentation Indexes slipped 3.3%, 5.8% and 3.5%, respectively.

Laboratory Instrumentation Stock Index

For the month, the Laboratory Instrumentation Index fell 3.3% to close at 600.24. Sixteen companies declined, while seven companies improved. Sequenom led the Index, soaring 108%, while Caliper Life Sciences declined 28%. For year, the Index is down 8.3%. Sequenom leads the way, up 67%, while X-Rite, despite a strong performance this month, has declined 78% and continues to weigh on the Index.

While there was little news in the way of earnings this month, several companies in the Index announced corporate initiatives to raise capital or repurchase company stock. On June 16, OI announced a repurchase of an additional 200,000 shares, expanding its previous repurchase stock program, however, shares traded lower by 3.2%. On June 17, Luminex announced a public offering of 3.5 million shares to be used for R&D, acquisitions or capital expenditures. Luminex reported on June 30 that it had raised $74.3 million in net proceeds from the offering, which included the exercise of the over-allotment option. Shares declined 10.1%. The offering price was set at $19.91 on June 25.

On June 23, Sequenom announced a similar offering of 5.5 million shares, to be used for general corporate purposes and product development, yet shares traded flat. Pricing was set at $15.50 on June 25. For Sequenom it was a roller coaster of a month, which ended on a high. Sequenom announced on June 4 that results for noninvasive screening of Down Syndrome using its technology were 100% accurate without any false positives. The news sent shares up 19.5%. However, on June 10, Sequenom reported that it had been served with a patent infringement lawsuit by Beckman Coulter and Orchid Cellmark (see IBO 6 / 15 / 08), sending shares down 6%. But the stock ended the month up more than 100%.

In other news, on June 2, Starlims announced a one-time cash dividend of $0.35 a share. However, shares traded marginally lower. On June 25, CombiMatrix announced that on June 27 it would join the Russel Microcap Index, leading shares up 4.6%. Caliper Life Sciences announced on June 30 that it would join the Russell 3000 Index. However, the stock closed down 3%. Joining the Russell 2000 Index was Sequenom, while Illumina moved from the Russell 2000 to the Russel 1000 Index.

Only one analyst's recommendation was changed this month. On June 13, UBS downgraded shares of Applied Biosystems from "Buy" to "Neutral." However, on June 23, Cowen& Company initiated coverage of Waters with an "Outerperform" rating, yet shares traded only 0.7% higher.

Process/Metrology/Motion Instrumentation Stock Index

In June, the Process/Metrology/Motion Instrumentation Stock Index declined 5.8% to 332.38, with seven companies trading lower and ICx Technologies gaining 9%. Nanometrics led all decliners, down 26%. Year to date, the Index has declined 16.0%, making it the worst-performing Index. All eight companies are in negative territory, led by RAE Systems, which is down 47%.

On June 10, FEI announced plans to retire a majority of its convertible debt, thereby reducing the number of shares used to calculate diluted EPS. On the same day, DA Davidson upgraded the company to "Buy" from "Neutral," sending shares up 5.6%.

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index declined 6.6% this month to 485.72, with six companies losing ground and QIAGEN up 1%. For the year, the Lab Consumable/Equipment Index has declined 3.9%, with only Techne trading higher, gaining 17%. Kewaunee Scientific was the worst-performing company for both the month and the year so far, down 37% and 45%, respectively.

After the market close on June 9, Pall reported adjusted fiscal third-quarter EPS of $0.54, $0.04 ahead of analysts' expectations. The company also provided full-year sales growth expectations in the mid-single digit range, leading shares up 4.8% the following day. On June 24, Kewaunee Scientific reported fiscal fourth-quarter EPS of $0.17 (see page 12), compared to $0.21 last year, sending shares down 35.3%.