The new year began with much of the same disheartening economic news as the previous year’s end, including escalating unemployment rates, subdued retail sales, corporate profit warnings and unrelenting liquidity concerns in the banking sector. For the first two trading weeks of the year, the Dow Jones Industrial Average, S&P 500 and NASDAQ declined 8.3%, 8.8% and 6.3%, respectively.

Even the historical inauguration of US President Barack Obama on January 20 could not excite the markets, as the Dow fell another 4.0% to close below 8,000, while the S&P 500 and NASDAQ declined 5.3% and 5.8%, respectively. However, the new administration’s message for change and commitment to fix the financial system was not forsaken. Discussions of a new stimulus package coupled with positive earnings from IBM helped ignite the markets the following day. On January 21, the Dow, S&P 500 and NASDAQ climbed 3.5%, 4.4% and 4.6%, respectively.

Unfortunately, on January 29, the markets could not withstand further economic instability, as news of falling home sales, weak corporate earnings and record-setting unemployment claims plagued media headlines, triggering yet another sharp sell off. Moreover, on January 30, the Commerce Department reported a decline of 3.8% for the fourth-quarter US GDP, the largest drop in over 26 years. For 2008, the GDP growth rate was 1.3%, the slowest pace of growth in seven years. Amidst all the doom and gloomy economic analysis, the Dow, S&P 500 and NASDAQ ended the month down 8.8%, 8.6% and 6.4%, respectively.

Despite the poor economic landscape and declining markets, two of the IBO Stock Indexes traded higher in January. The Lab Consumables/Equipment and Process/Metrology/Motion Instrumentation Stock Index declined 8.9% and 4.6%, respectively, while the Laboratory Instrumentation and Diversified Instrumentation Indexes improved 1.8% and 0.6%, respectively.

Laboratory Instrumentation Stock Index

There were two changes in the Laboratory Instrumentation Stock Index to begin the year. CombiMatrix was removed due to the company’s shift to microarray products for diagnostic applications, while the DNA sequencer company Helicos Biociences was added. For January, the Index climbed 1.8% to close at 397.41. Thirteen companies traded in negative territory, while nine companies improved. Helicos led the Index, soaring 135%, while Cepheid fell 28%.

Several companies preannounced disappointing results this month. On January 13, Cepheid reported preliminary fourth-quarter revenues of $38 million and forecast 2009 revenues of approximately $170 million. Analysts expected $42.6 million in quarterly revenues and $174.4 million in annual sales. Sales this year are expected to be flat. The company’s shares fell 15.6%.

Caliper Life Sciences announced on January 15 that fourth-quarter revenues would be approximately $36.5 million, roughly 4.0% below analysts’ estimates, and that 2008 sales would be approximately $133.9 million, compared to analysts’ estimates of $135.4 million. The company expects sales to grow 4%–7% for 2009, slower than analysts forecasted, yet shares climbed 4.7%. On January 16, Varian warned that first-quarter EPS would fall below expectations to $0.50–$0.54 (see page 2), compared to analysts’ consensus of $0.62 a share, sending shares down 4.4%.

Despite early profit and revenue warnings, several companies in the Index managed to report positive results. On January 27, Waters beat analysts’ expectations by $0.12 with fourth-quarter EPS of $1.07 and sales growth of 9.2% (see page 12), leading shares up 2.7%. On January 29, Dionex announced second-quarter EPS growth of 20.8% to $0.93 (see page 12), $0.10 better than expectations, and increased its full-year EPS guidance by $0.02 to $2.98–$3.10. Shares climbed 3.7% the following day.

Also on January 29, PerkinElmer reported fourth-quarter EPS of $0.48 (see page 12), $0.06 better than analysts’ forecasts, but lower than expected revenues. The company also projected flat 2009 EPS growth, sending shares down 13.7% the following day. Affymetrix, which reported on January 28, disappointed investors with a wider than expected loss. The company posted a loss of $0.36 per share for the fourth quarter (see page 12), $0.17 below consensus, sending shares down 19.8% the following day.

In other news, on January 14, Bruker announced an order with the Japanese National Police Agency for 51 micrOTOF-II MS systems, valued at more than $12 million. Shares jumped 35.2%. On January 20, Luminex reported that COO Douglas Bryant had resigned to become president and CEO of diagnostic company Quidel. Shares traded down 4.6%.

On January 29, Standard & Poor’s Rating Service raised Thermo Fisher Scientific’s corporate credit and senior unsecured debt rating one level to an “A-,” however, shares traded slightly lower due to poor market conditions. On the same day, Sequenom reported positive results for its SEQureDX genetic Down Syndrome test, leading shares marginally higher. Also on January 29, X-Rite announced the completed sale of its former headquarters, which will help reduce operating expenses and partial debt repayment. Shares traded marginally lower.

On January 9, Needham downgraded Cepheid to “Hold” from “Buy,” while on January 12 and 13, William Blair and Leerink Swann both downgraded the company to “Market Perform” from “Outperform,” respectively. On January 14, Caris & Company downgraded Cepheid to “Above Average” from “Buy.” JP Morgan downgraded Affymetrix on January 29 to “Underweight” from “Neutral.” On January 30, Thomas Weisel Partners downgraded PerkinElmers from “Overweight” to “Market Weight.”.

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index declined 8.9% in January to 220.33, making it the worst-performing Index to begin the year. Six companies traded lower, while Nanometircs and Strategic Diagnostics improved 16% and 6%, respectively. RAE Systems led all decliners, falling 33%.

Zygo was the only company in the Index to report earnings this month. The company posted a second-quarter loss on January 29 of $0.04 a share, $0.07 ahead of analysts’ expectations, leading shares up 2.3% the following day. Earlier in the month, on January 20, Zygo’s Board of Directors recommended against the takeover bid by Electro Scientific Industries, sending shares down 7.4%.

In other news, Global Crown Capital initiated coverage of FEI on January 13 with a “Neutral” rating. On January 21, JP Morgan downgraded ICx Technologies to “Neutral” from “Overweight.” On January 22, Pall raised its quarterly dividend by 11.5% to $0.15 per share.

Lab Consumables/Equipment Stock Index

In January, the Laboratory Consumables/Equipment Stock Index fell 4.6% to 347.61, with four companies declining, one company trading flat and three companies in positive territory. Sigma-Aldrich led the decliners, losing 15%, while Life Technologies climbed 9%. The one change to the Index was the addition of Enzo Biochem, a supplier of research tools, diagnostics and therapeutics for genetic processes with fiscal 2008 revenues of $77.8 million.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index edged 0.6% higher for the month to 347.61. Four companies declined, led by Teledyne Technologies, which fell 37%, while Agilent Technologies and AMETEK improved 16% and 6%, respectively.

Quarterly earnings results and projections were mixed for the Index. On January 26, Danaher reported fourth-quarter EPS growth of 5.7% to $1.11 (see page 12), $0.06 ahead of analysts’ consensus, leading shares up 9.3% the following day. The company projected first-quarter EPS of $0.70–$0.80 and reconfirmed full-year earnings of $3.70–$4.10 per share. Teledyne Technologies beat fourth-quarter earnings estimates by $0.06 on January 22, with EPS growth of 15.1% to $0.84. However, the company projected first-quarter and 2009 EPS to be $0.50–$0.55 and $2.70–$2.80, compared to analysts’ expectations of $0.78 and $3.40, respectively. Shares declined 18.9%. On January 30, AMETEK reported fourth-quarter EPS of $0.66 (see page 12), a decline of 15.8%, but in line with analysts’ expectations. The company also forecasted first-quarter and full-year 2009 EPS of $0.54–$0.58 and $2.40–$2.60, compared to analysts’ consensus of $0.59 and $2.48, respectively. Shares ended the day modestly higher.

On January 12, Robert W. Baird upgraded Mettler-Toledo to “Outperform,” but, on January 23, UBS downgraded shares to “Neutral” from “Buy.”

International

In January, two Pacific Region companies showed stock price gains, while three companies declined. Horiba was the best-performing company, rising 16%, while JEOL fell 7%. On January 26, Hitachi High-Technologies reported nine-month EPS of ¥69.34 ($0.67) compared to EPS of ¥147.10 ($1.26) a year ago.

Beginning this month, UK-based Scientific Digital Imaging (see IBO 11/30/08), a maker of digital imaging technology for scientific applications, was added to the list of European companies in the IBO stock table. In January, stock prices for eight European companies improved, six companies lost value and Alpha MOS was unchanged. Millbrook Scientific Instruments led all companies, climbing 73%, while Renishaw lost 33%.

On January 15, Genetix reported preliminary 2008 revenue growth of approximately 14%, as well as improved gross margins and a strong cash position, helping shares climb 9.0%. On the same day, Spectris pre-announced 2008 revenue growth of roughly 19%, in line with expectations, leading shares up 9.7% the following day. On January 28, Renishaw reported half-year EPS of £0.15 ($0.26), a decline of 7.2%. Shares traded marginally higher.

Chart: IBO Instrument Industry Stock Index

Lab Instrument Stock Index S&P 500

Jan-07 564.40 344.83

Feb-07 537.67 337.29

Mar-07 553.46 340.66

Apr-07 568.74 355.41

May-07 576.11 366.98

Jun-07 573.08 360.44

Jul-07 584.65 348.91

Aug-07 604.22 353.40

Sep-07 648.03 366.05

Oct-07 678.52 371.47

Nov-07 654.48 355.11

Dec-07 656.46 352.05

Jan-08 583.13 330.52

Feb-08 607.77 319.03

Mar-08 600.29 317.13

Apr-08 600.29 332.20

May-08 622.99 335.75

Jun-08 602.24 306.89

Jul-08 639.07 303.86

Aug-08 643.46 307.57

Sep-08 590.45 279.64

Oct-08 456.82 232.26

Nov-08 416.63 214.88

Dec-08 390.29 216.56

Jan-09 397.41 198.01