Varian Inc.VARI

Varian has experienced rapid, high-teens growth in the Asia-Pacific market, driven by a growing need for environmental and industrial testing equipment. Despite near-term pressures, Chinese and Indian economies should eventually bounce back and continue to fuel Varian's long-term growth.

Varian's large installed equipment base generates a recurring stream of revenue in the form of service, software upgrades, and consumables, which account for 30% of Varian's total sales.

Varian enjoys a first-mover advantage in NMR. The company has only one direct competitor, Bruker Biosciences BRKR, and its technology is patent-protected and would require several years to duplicate.

Varian is the only MS distributor that manufactures vacuum pumps, one of the key components of MS platforms, which could afford the company some pricing flexibility.

A planned MS factory consolidation should provide the company's gross margin a boost, starting in 2009. Read more 

Varian has historically been shunned by large pharmaceutical clients as the firm's MS instruments were not able to offer the level of precision required in drug development and afforded by rivals' equipment.

Demand for the company's industrial testing equipment is cyclical, particularly in the mature U.S. market. When capital budgets tighten, end users prefer to extend the life span of testing platforms instead of replacing them with newer versions.

Varian has significant exposure to foreign exchange, as more than 70% of its sales come from the overseas markets.

Myriad restructuring charges and write-offs during the last few years has made Varian's financial picture murkier and more difficult to compare with its peers. Read more