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The Newborn Care Business of Natus Medical Inc. (BABY) is a Reassuring Profit Model

Though 2006 ended for this company with disappointing business results compared to a profitable 2005, the management has achieved a noteworthy turn-around during the quarter ended September 2007. Stock analysts expect the business improvement trend to continue in the foreseeable future.

This confidence stems from the comprehensive restructuring plan the management has set in motion. This strategy has three important components: first, to rationalize manufacturing operations and sites that are currently strung out from Illinois to Seattle and Ontario. Second, the company has decided to eliminate wasteful duplication within the multiple sales forces it has inherited from earlier acquisitions. Finally, the company intends to extend its outsourcing of simple assembly operations This will allow the management to focus on more specialized operations, which is valuable in such a high-technology business.

The company is engaged in the vital area of healthcare for the new born. The company’s products and systems help doctors detect hearing, nerve fiber, and brain disorders, and to treat them as well. It also markets software for public health installations. The company is also involved in treating infants for jaundice, and connected with sleep disorders in general.

The restructuring announced by the management will deliver savings worth $2.4 million in 2009. This is impressive considering that the September 2007 return to profitability resulted in net income of just $3.16 million. Investors will be reassured to know that though the restructuring will involve severance payments, the management has planned to execute the plan in overall cost-neutral fashion during 2008.

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