J&J needs Guidant's deep middle-management bench and the cooperation of senior management.

Boston Scientific still has much 'wood to chop' regarding the recovery of the company's cardiac rhythm management business...That said, we believe earnings power for businesses remain substantial.

Overall, we found results in the quarter to be generally weak, but believe the strong market reaction was justified given the anticipated completion of the Guidant vascular acquisition.

Results were dramatically lower than consensus estimates in both cases and reflect the challenges the company faces in rebuilding its CRM [cardiac rhythm management] business.

We believe it will be critical for BSX to carefully manage its interaction with the FDA.

Greater clarity regarding this transaction and future growth goals (without the Guidant acquisition) are needed.