The calendar-year first quarter proved to be an outstanding quarter for major analytical instrumentation providers. Growth in key end-markets remained robust. Among end-users, industrial spending, especially in the petrochemical and commodities sectors, continued to fuel instrument demand. Steady spending by big pharmaceutical companies was also reported by providers. Regionally, China and India remained the focal point of Asian growth, while European demand stayed solid. Consumables and services also continued to drive growth. Quarterly sales for the 11 companies profiled on pages 9–11 (excluding Mettler-Toledo) grew 12.0%. Double-digit sales growth was a predominate trend, with seven of the 11 companies reporting growth of more than 10% in US dollars. Favorable currency effects for US companies also boosted sales growth, and acquisitions contributed favorably to Applied Biosystems, Bruker BioSciences and Waters’s sales results. Dionex reported its best quarter ever, and the company, along with Waters and Varian, increased its fiscal year guidance. Operating profit growth was even better. Seven companies reported double-digit growth for operating profits, with five companies reporting growth of more than 20% due to revenue growth, acquisitions, productivity improvements and favorable currency effects. In total, operating profits for the 11 companies increased 20.7%. Among the companies benefiting from growth in both industrial and environmental markets were Dionex, Thermo Fisher Scientific, Varian and Waters. Agilent, Dionex and Waters benefited from the ongoing rebound in pharmaceutical spending. The sour note for some companies was academic and government spending, particularly in the US. Bio-Rad Laboratories and Applied Biosystems both commented on the trend. Another disappointing market was Japan. Applied Biosystems, Bio-Rad and Mettler-Toledo each noted the market’s difficulties. The US showed a slight rebound, which Dionex and Waters attributed to pharmaceutical spending, but Varian noted that the movement of manufacturing overseas continued to hurt the US market’s prospects. HPLC sales remained robust, according to Agilent, Dionex and Waters. And Mass spectrometry sales growth, led by food and environmental testing applications, were once again a highlight for Agilent, Applied Biosystems, Thermo Fisher Scientific and Varian. Bruker BioSciences’ Bruker AXS unit and Waters’s TA Instruments division also reported strong demand. For Affymetrix and Bio-Rad, the quarter was more challenging. Affymetrix attributed its slower growth to the decreased pricing of certain products, while Bio-Rad noted a tough Asian academic market and an unexpectedly weak US academic market. Germany-based Analytik Jena AG reported flat quarterly sales as domestic sales posted a decline. The summary of financial results presented here is based on companies’ financial reports, conference calls and SEC filings. Affymetrix’s first quarter revenues slipped 6.9% to $80.4 million. Product revenue declined 12.4% to $57.8 million primarily due to lower pricing of probe array products. Revenue for probe arrays declined 17% to $35.7 million; $6.5 million of the decline was attributed to pricing pressure on its two-chip 500K genotyping product. Similarly, Instrument revenue dropped 31.0% to $8.5 million. Of this decline, $1.6 million was a result of lower selling prices of its GeneChip Scanner 3000 and $1.5 million was due to falling unit sales. Conversely, Reagent revenue climbed 30.0% to $13.6 million primarily due to increased unit sales. The company reported a consumables mix of 65% RNA products and 35% DNA products. Product-related revenue improved 2.2% to $13.5 million despite a significant drop in subscription fees. Royalties and revenue from Perlegen Sciences helped offset lower product sales, gaining 29.1% and 26.0% to $2.4 million and $6.7 million, respectively. The company reported that 65% of sales were to academic customers and 35% were to industrial markets. Excluding restructuring costs of $5.4 million, operating loss widened to $3.3 million from a loss of $3.0 million a year ago. For 2007, revenues are estimated to be $365–$385 million with gross margins in the mid-60% range. Fiscal second quarter revenues for Agilent Technologies’ Bio-Analytical Measurement (BAM) segment grew 15.1% to $428 million to account for 32.4% of total company revenues. This marked the fourth consecutive quarter of double-digit sales growth for BAM. Orders climbed 14.0% to $457 million. Operating profit jumped 48.9% to $67 million, and gross margins improved three percentage points to 53%. Sales in the Americas, Europe and Asia grew 11%, 19% and 16%, respectively. Revenue for Chemical Analysis rose 11% to $234 million led by 30% growth for the forensics market and 14% for the environmental market. Revenue in the food safety market grew 7% and petrochemical testing orders remained strong at 16%, but sales were limited to 3% growth due to the transition to new GC and GC/MS products. Chemical Analysis consumables and services revenues grew at double-digit rates. Life Sciences reported revenue of $194 million, up 20%, as a result of strong demand for the new LC and LC/MS portfolio. Microarray revenues increased more than 50%, benefiting from comparative genomic hybridization applications. Pharmaceutical and biotechnology markets improved 20%. Additionally, growth of contract research organizations and R&D spending by generic pharmaceutical companies and government organizations helped spur sales. Excluding favorable exchange rates, Analytik Jena AG’s sales for the fiscal second quarter edged 0.8% lower to €16.1 million ($21.1 million = €0.76 = $1) from €16.2 million ($19.5 million = €0.83 = $1) (see page 12). Operating profit climbed 38.1% to €0.8 million ($1.0 million = €0.76 = $1) from €0.6 million ($0.7 million = €0.83 = $1) on a currency-neutral basis. Analytical Solutions sales slowed 4.6% to €7.9 million ($10.4 million) after a strong fiscal first quarter, but still accounted for half of instrument sales. A substantial increase in orders for the Optical Solutions business, particularly during the International Trade Fair for Hunting and Sporting Arms, drove sales up 33.8% to €1.6 million ($2.1 million) to represent 10.0% of total sales. Project Solutions and Biosolutions revenues declined 2.4% and 1.2% to €5.9 million ($7.7 million) and €0.7 million ($0.9 million), making up 36% and 4.0% of total sales, respectively. Sales in Germany accounted for 21.0% of revenues and declined 11.0% to €3.4 million ($4.4 million), while sales outside Germany improved 2.3% to €12.7 million ($16.7 million). Over the last two quarters, sales to the US improved 50.1% to €1.5 million ($2.0 million). While sales momentum is expected to continue, fiscal third quarter results may slow in comparison to the previous quarters. However, the company anticipates improved earnings in all business units. Applied Biosystems announced fiscal third quarter revenue growth of 8.0% to $529.9 million, or 6.0% growth on a currency-neutral basis. The acquisition of Ambion (see IBO 12/31/05) contributed 2.6% to revenue growth. Instrument sales grew 4.1% to $215.6 million, Consumables sales climbed 15.6% to $221.0 million (including $18.5 million from Ambion) and all other revenue edged 0.9% higher to $93.3 million. Instrument and Consumables revenues both benefited from increased sales in the Mass Spectrometry and Real-Time PCR/Applied Genomics product categories. The Instrument segment reported strong growth in quality and safety testing applications, especially for food and environmental testing. Real-Time PCR/Applied Genomics sales jumped 13.0% (or 10.0% excluding Ambion), DNA Sequencing sales improved 3.1%, Mass Spectrometry revenue gained 11.8%, Core PCR & DNA Synthesis sales declined 9.3%, due to lower PCR royalty revenue, and sales from all Other Product Lines improved 20.0% (see table). The Global Services Division grew 14% across all of the product categories, benefiting from new service plans and specialized services. Adjusted operating income climbed 7.8% to $94.0 million, and gross margin improved 20 basis points to 56.4%. US sales rose 4.3% to $227.4 million, European sales jumped 16.4% (or 9% on a currency-neutral basis) to $182.8 million, Japanese sales declined 6.0% to $57.9 million, including an unfavorable impact from foreign currency of approximately 1%, and sales to other Asian Pacific countries rose 13.0% to $39.7 million, including a favorable foreign currency impact of approximately 2%. Life Sciences (LS) sales for Bio-Rad Laboratories slipped 2.2% or, on a currency-neutral basis, declined 5.7% to $141.6 million to account for 43.9% of company sales. The continued weakness in US and Asian academic markets negatively impacted LS sales. Revenue was also affected by lower sales of the gene expression product line and BSE tests. Excluding the decline in BSE revenues, LS sales increased 2.5% on a currency-neutral basis. The only significant area of growth came from products for protein expression analysis. LS segment profits dropped significantly to $5.5 million, down 61.0%. Weaker profitability was attributed to lower gross margins, a cost of goods resolution payment of $1.8 million and increased R&D efforts related to the Ciphergen acquisition (see IBO 8/15/06). Competition in the BSE test market drove profit margins lower and continued to negatively impact the LS segment. The company expects mid-single-digit top-line growth for 2007. Bruker BioSciences’ revenues grew 16.5% to $110.5 million, or 10.6% on a currency-neutral basis. Excluding acquisition charges, operating income jumped 28.4% to $7.8 million and gross profit margin improved 150 basis points to 47.6% of total revenues. Product revenue rose 13.7% to $95.4 million and Service revenue soared 44.5% to $15.0 million, while Other revenue slipped 76% to $0.2 million. Bruker AXS sales rose 37.2%, or 30.6% on a currency-neutral basis, to $51.9 million. Acquisitions accounted for 12.0% of AXS revenue growth. X-Ray System sales grew 42.3% to make up 67.3% of AXS revenue, Aftermarket sales improved 8.7% to account for 23.9% and Other Systems revenue gained 145.3% to represent 8.8%. Bruker Daltonics sales grew 4.1% to $39.1 million, but declined 1.5% on a currency-neutral basis as a result of reduced OEM sales for certain life science systems and reduced grant revenue. Life Science Systems and Grant revenues dropped 7.1% and 76.4% to account for 69.1% and 0.4% of Daltonics sales, respectively. CBRN Detection and Aftermarket sales improved 155.7% and 29.7% to represent 9.0% and 21.9% of Daltonics sales, respectively. Bruker Optics sales edged 2.1% higher to $21.7 million but, excluding the effect of the foreign exchange benefit, revenue declined by 2.7% due to production delays and lower Other System sales. Sales of Molecular Spectroscopy systems improved 0.3% to account for 71% of Optics sales, Aftermarket revenue jumped 37.9% to represent 21.3% and Other Systems revenue decreased 34.3% to make up 7.7%. During the quarter, Bruker BioSciences acquired Keca Metal Products, which provides specialized machining services, mainly to Bruker Optics. Revenues for Dionex’s fiscal third quarter improved 15.3%, or 11.9% on a currency-neutral basis, to $84.9 million. Environmental sales grew in the high single digits, Life Science sales improved around 15% and Industrial sales increased approximately 12%–13%. Operating income climbed 19.2% to $18.0 million, while gross profit margin slipped 30 basis points to 65.6% of total sales. Revenue growth was spurred by strong demand for the HPLC, ASE and consumables product lines. Consumables and instrument revenues both improved around 12%, while Ion Chromatography sales climbed 14% and HPLC sales improved 21%. North American sales climbed 13%, European sales grew 19% (or 11% in local currency) and Asian/Pacific sales rose 12%. The company anticipates net revenue for the fourth quarter of $79–$83 million. For the full year, sales guidance was increased from a February guidance of $312–$320 million to $320–$324 million and diluted earnings per share are estimated to be $2.24–$2.28. Sales of Mettler-Toledo International’s Laboratory products increased 5% in local currencies for the first quarter to account for 44% of total company revenues of $387.8 million. Process analysis, laboratory balances and analytical instruments, led by strong sales of titrators and pH meters, all reported high to mid-single-digit growth. Pipettes sales were in the low single digits with modest US growth, but positive international sales, while AutoChem sales were flat. In the first quarter, revenues for PerkinElmer’s Life and Analytical Sciences unit (LAS) grew 14.4% to $299.5 million, accounting for 74.3% of total company sales. Acquisitions contributed 5.3% growth to LAS sales, while favorable currency transactions added 3.1% growth. Genetic Screening, Service and Environmental/Chemical revenues each grew in double digits to account for 14%, 25% and 26% of LAS revenues, respectively. Biopharmaceutical sales grew in the mid single digits to make up 36% of LAS revenues. LAS operating profits declined 37.4% to $14.9 million as a result of increased amortization expenses and purchase accounting adjustments, along with lower gross margins and higher investment costs. The company anticipates total second quarter sales growth in the low double digits, including acquisitions and current currency exchange rates. Pro forma sales for Thermo Fisher Scientific’s Analytical Technologies (AT) segment grew 15%, or 7% organically, in the first quarter to $1.01 billion to make up 43.0% of total company revenues. AT operating income grew 31% to $189.8 million, and operating margin improved 260 basis points to 13.1% of sales on a pro forma basis. Both industrial and life science sales were strong, with particular strength in biotech and environmental markets, as well as in specialty diagnostics. R&D for AT accounts for 5.1% of revenues and makes up roughly 80% of the company’s total R&D spending. Varian’s Scientific Instruments division (SI) revenue grew 11.0% to $190.3 million to make up 82.8% of total sales. Growth was primarily attributed to higher analytical instrument sales and strong demand for industrial applications. Sales for Life Science applications were flat to slightly down for the quarter. Aftermarket sales accounted for 33% of total company sales, 15% of which consists of consumables. Bioconsumables sustained strong momentum outside North America, in particular the Pacific Rim and Latin America. Sales in Europe and Latin America both improved over 20%, and Asian/Pacific sales climbed in the mid-teens, while US sales continued to show slow growth. SI adjusted operating profit increased 36.3% to $24.8 million, and adjusted gross margins gained 240 basis points to 13.0%. Company revenues are expected to grow 8%–9% this fiscal year, and adjusted operating margin is anticipated to be 12.5%–13.0% of sales. Waters’s first quarter revenues improved 14.0%, or 9.3% on a currency-neutral basis, to $330.8 million. Acquisitions contributed 2.0% to revenue growth, while newly introduced instrument systems and consumable products helped drive quarterly sales higher. US sales jumped 21%, European sales improved 14% and Asian sales (including Japan) grew 12%. Product sales climbed 14.6% to $239.0 million. Sales of Liquid Chromatography (LC) and Mass Spectrometry (MS) instrument systems improved 9.1% to $162.2 million, while Chemistry sales increased 24.7% to $54.2 million. TA Instruments’ sales grew 37.7% to $22.6 million, of which 2% growth was attributed to favorable currency translation and 6% growth was related to acquisitions. Service revenue climbed 12.4% to $91.8 million, as LC and MS service revenue improved 10.9% to $82.4 million, and TA service revenue grew 27.8% to $9.4 million. Adjusted operating income improved 15.2% to $74.9 million. Sales to pharmaceutical customers grew 15%, sales to industrial and food safety customers grew 19%, and sales to government and academic customers improved 11%. Gross margins declined 170 basis points to 56.7% as a result of higher manufacturing costs for new products and unfavorable foreign currency transactions related to MS products manufactured in the UK. Despite overall concerns for a weaker domestic market, Waters anticipates sustained growth from pharmaceutical customers and from the industrial markets in the US. Thus, the company raised its full-year revenue growth forecast to 12%, or 9% organically, compared to the January forecast of 7%–9% organic growth. For the second quarter, sales are anticipated to grow 14%.