Monday, December 18, 2006

Calls of Note Part 1

- First Albany is cautious on FoxHollow Tech (NASDAQ:FOXH) following meeting with management saying the co sees slower PAD market growth than its competitors, which according to the firm confirms that the SilverHawk business is facing growth hurdles over the near term. FOXH estimated PAD market growth at 8%-10% versus 20%+ estimated by the management teams of two other PAD players visited on firm's bus tour.

Firm lowers U.S. SilverHawk revenue estimate for 4Q and 2007 by $2.2M and $22M, respectively, and 2007 GAAP EPS estimate to $0.81 from $1.02 (consensus $0.75, range $0.41-$1.20).

Also, FOXH may be contemplating a transformational acquisition. Heretofore, the firm has perceived FOXH management to be "anti" balloons/ stents. However, the meeting leads them to believe FOXH may be gearing up to transform into a broad "vascular treatment company" vis-a-vis potential acquiring into one or both of these areas. While occurrence - let alone timing - is clearly an unknown, such a move would undoubtedly be a "sea change" in FOXH's approach to the PAD market and its customer base. Assuming for a moment that FOXH makes such a move, they would be slightly concerned about how investors would react.

They think FOXH may languish until there is better 2007 visibility, guidance for which may come in January. However, while sentiment regarding such a potential acquisition may be negative at first, the firm thinks a broad-product vascular treatment company makes sense and may ultimately be good for shareholders. Maintains Neutral.

Notablecalls: Chart sure looks ominous. The stock will surely get hit following the comments. However, I would be somewhat reluctant to short into a large gap down as I suspect there will some some short covering. For long's sake I hope this train stops before the $21 level.

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