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Intuitive Surgical, Inc. (ISRG) Tanks: Here’s What I’m Doing

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Intuitive Surgical, Inc. (NASDAQ:ISRG)After the market closed yesterday, Intuitive Surgical, Inc. (NASDAQ:ISRG) — maker of the da Vinci Robotic Surgical System — announced preliminary results for the second quarter that caused shares to plunge as much as 17% today.

Read below to find out why the reaction has been so negative, and — with Intuitive stock making up over 5% of my real-life holdings — what I’ll be doing as a shareholder.

Moving in the wrong direction stateside
Intuitive Surgical, Inc. (NASDAQ:ISRG) announced that for the second quarter of 2013, revenue would be $575 million. While that’s 7% better than last year, it’s well below the consensus estimate of $630 million.

Just as important, it shows growth slowing dramatically compared to previous years.

Sources: SEC filings, E*Trade.

While procedures and instrument sales were up a healthy 18% — and service revenue was up 14% — it was revenue from the sales of new da Vinci systems that were down 6%. The main culprit behind the miss was a dramatic reduction in the sales of new da Vinci Systems in the United States.

Source: SEC filings.

A perfect storm brewing
This year hasn’t been kind to shareholders of Intuitive Surgical, Inc. (NASDAQ:ISRG) Stock. The FDA announced earlier this year that it was opening an investigation into the company. Though that didn’t yield any earth-shattering findings, it came right in the middle of medical professionals publicly questioning whether the da Vinci System had any real benefits for hysterectomy patients.

Though it’s impossible to tell what’s behind this miss, the company said, “increased economic pressure on hospitals… and moderating growth in our benign gynecologic procedures,” were to blame.

Though I’m no medical professional, as someone who has been following the company for years now, I have two thoughts on what this means.

First, fellow Fool Sean Williams put out an excellent piece on how Obamacare could be affecting domestic weakness. Although hospitals are thought to be a main beneficiary of the new law, Intuitive products are now carrying a heavier tax burden. Even more important, there are a lot of unanswered questions when it comes to costs under Obamacare. And as well all know, with uncertainty comes conservative spending practices, forcing hospitals to put large purchases on hold.

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