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Advanced Medical Optics (EYE) has revised guidance downward claiming that the shift to higher margin products is taking longer than anticipated.

Long term debt has mounted at an alarming rate, nearly doubling since year end from $500 million to $871 million at last count. Much of this debt was taken on assuming higher margins could adequately debt service the obligations. The company soft peddled its leverage saying that it expects total debt outstanding to be approximately $900 million at the end of the third quarter and adjusted cash from operations for the nine months ended September 29, 2006 to exceed $70 million.

Management has been playing with fire. Now investors are getting burned.

EYE 1-yr chart:


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Source: Advanced Medical Optics' Poor Vision Means Investors Are Getting Burned