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Can Tyco Healthcare Go It Alone?

Executive Summary

There's little argument that over the past several years, Tyco International has emerged as a powerhouse in the hospital supply and medical device industries through aggressive deal-making and a creative leveraging strategy that has enabled it to increase profits even in price-sensitive markets. Now Tyco, under pressure from fall-out over the scandal engulfing Enron, is breaking up in an effort to restore investor confidence and value. Some time in the future, Tyco Healthcare will operate as a stand-alone company. Yet questions loom large as to how well Tyco's strategy will play with the investment community, with some industry executives believing Tyco Healthcare has more value broken-up than as a public company.

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Whither Tyco? Whither Hospital Supply?

Tyco International is creating a colossus in hospital supply. But as customers in this consolidated, nationalized market become more demanding--asking for brand name products at ever lower prices--has the strategy run its ground. The demise of American Hospital Supply and new, more high tech focuses of companies like Johnson & Johnson and Abbott Laboratories suggests that hospital suppliers to survive must concentrate on higher margin businesses immune to the pressures of national contracting.

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