Spectranetics Corp (f/k/a SPNC)

[Democritus_of_Abdera]

SPNC Strategy: Maximize Debt-Free Growth

After listening to the Feb 20,2008 CC, I have come to the conclusion that SPNC is singularly focused upon maximizing debt-free growth. This focus drives net operating cash flow and earnings to zero. The zero’d earnings are likely to persist for some time largely due to the cash flow needed to support clinical trials.

Highlighting this imputed strategy is the following statement from the CFO’s (Guy Childs’) prepared remarks: “For the full year we were essentially break even based on cash flow from operating activities accomplishing our objective of becoming self-sustaining on an operating basis.”

Frankly, I am excited by SPNC’s technology, its market, and the relative weakness of its direct competitors. But, I am no hurry to invest in this stock this quarter, largely because the guidance given in the CC is that “pre-tax income for 2008 is expected to be within the range of 1 million to $5 million ... [with the] a pre-tax net loss in the first quarter of approximately $1.5 to $1.8 million based on the committed costs noted previously in the call and the fact that expect first quarter revenue to be flat to slightly down as a result of lower laser revenue mentioned previously and typical seasonality in the first quarter of the year.”

This stand-back attitude might change if the price drops to absurdly low levels, the direction it seems to be headed. In the interim I am happy to reap the rewards of SPNC’s growth in disposable catheter sales through my investment in SRDX which recieves a royalty for its catheter coating technology (see #msg-25521042).