Five Reasons to Short Varian Medical Systems

| About: Varian Medical (VAR)

Varian Medical Systems (NYSE:VAR), designs, manufactures, sells and services equipment and software products for treating cancer with radiotherapy, stereotactic radiosurgery and brachytherapy. The company also develops, designs, manufacturers and services proton therapy products and systems for cancer treatment.

Reasons for Shorting

  1. Hospitals are under extreme pressure for equipment in the multi-million dollar range.
  2. Phillips commented that budgetary restrictions are becoming very real in the equipment area.
  3. Significantly higher financing costs and tougher terms means the payback is longer and delays equipment purchases.
  4. Last quarter, equipment sales slowed dramatically. I contend this quarter will be even more constrained.
  5. Last quarter was weak for VAR and yet it is trading at the same levels. Accounts Receivables were up Q on Q (534 vs 467m) and inventories also increased (340m vs 328m). Cash from Operations declined significantly.