Friday, February 02, 2007

Quest Diagnostics and the Strategy of Diversification Economics

Just when you think that there isn’t much happening at Quest Diagnostics you open the Business Section of the local paper and see the headline “Quest buys into instant blood tests.” In what seems to be an effort to counteract any negative financial results of the United Healthcare issue upon the company C.E.O. Surya N. Mohaptra has fallen back on the lessons of his mentor and former Quest C.E.O. Ken Freeman in the understanding that buying into established and proven markets is a key to a successful venture.

That assessment of mine for the reason for the purchase might be a little off base as this action might in fact have a tracking date starting before the United Healthcare issue as these types of business deals don’t simply happen overnight. This might very well be a strategy a part of an overall long term growth and diversification plan. In any event it surly will prove in my view to be a good investment plan.

Through this accusation Quest Diagnostics will diversify the business and open new markets for future growth potential. It is and always has been the operating philosophy of Quest Diagnostics to constantly be on the cutting edge of new technologies which can be linked to and incorporated into the main focus of the business.

Through the acquisition of Swedish based HemoCue AB for what is reported to be $420 million in cash Quest Diagnostics has positioned itself in an area which it obviously believes has great potential.

The market seems to be happy with the purchase as the stock rose 58 cents a share Thursday closing at $53.06. The lower stock price is something which has been a sad fact since the United Healthcare contract moved to Laboratory Corporation of America.

I have always felt that the stock was way undervalued and suggested that it is a good and sound investment. Even at the new higher price I still believe that this market is open to growth potential.

Even though Mohaptra reported to investors that the company believes that it will lose most of the United Healthcare business it is asking all members of the company to fight for every single requisition that it can obtain from United Healthcare out-of-network specimens.

I believe that even though issues involving integrity, religiously practiced at Quest Diagnostics, might have compelled Mohaptra to take that position with the investors, in reality the company will achieve a higher than anticipated result in retaining accounts and producing results.

One of the things which offer the investor a glimmer of hope that things will continue on track is the dedication of all employees of Quest Diagnostics in working as a team in doing what needs to be done, a nip here, a tuck there in order to trim waste and make the company as lean and efficient as in humanly possible.

It is clear that Surya Mohaptra and the entire administrative staff at Quest Diagnostics has placed their confidence in the people who tow the line and those people are doing everything in their power to keep Quest Diagnostics a strong and vibrant company.

That can be seen by clients in the way in which those clients of Quest Diagnostics are treated by phlebotomists at the Patient Service Centers. What cannot be seen by those clients is the way in which the rest of the staff treats those clients’ medical specimens behind the scenes.

In fact every specimen is viewed as representing a patient who is concerned about their health and wants a fast and accurate determination about their condition. At Quest Diagnostics they are going to get that result. Every test is given as much importance as it deserves. That is what quality is all about.

So once again the actions of the administration have remained true to the focus on providing quality results and cutting edge technology in order to make and keep this company strong.

As a side note it seems that I may have beaten Bruce Friedman to the HemoCue story but I am sure he will have something to say about it soon enough, including far more details and important insights into this company. It will be interesting to read his thoughts on the issue. I look forward to your thoughts Bruce.

After all I am just a snake oil salesman, indeed seemingly a pseudo apparatchik.
Snake Oil Sam
Snake Oil Sam Internet Media Publishing © 2007

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