- The Washington Times - Monday, July 2, 2001

Shares of Danaher Corp., which had been unfazed by the recent economic downturn, fell 13 percent last week after the company announced it might not make yearly earnings estimates.

The D.C.-based manufacturer of environmental controls and tools blamed the downturn for causing weakness in certain sectors of the company.

"Our business in Asia saw weakness in May and June following a rather robust start," Danaher President and Chief Executive H. Lawrence Culp said in a conference call Wednesday. "The technology markets have been very soft of late."

Despite the yearly earnings warning, the company says it expects to meet estimates for the quarter and says it was comfortable with analysts' estimates of 0.63 per share for the quarter.

Danaher, best known as the manufacturer of Craftsman Tools, has been a model of stability through current economic conditions, hovering above $60 per share for much of the year. It hit a four-month high at $65.19 last Tuesday before the close of markets.

But in the wake of the ominous earnings announcement, the stock dropped more than $7 last Wednesday, and closed Friday at $55.90

"We know we're going through some dramatic events in the economy at large," Mr. Culp says. "The sudden downdraft is something I don't expect to see again for some time."

Danaher has made some cost-cutting moves this year, including the firing of about 3,000 of its 25,000 or so employees. Many of the layoffs coincided with acquisitions.

Despite the economy and the company's resulting struggles in the past week, Danaher remains a favorite among analysts.

"This is still one of the premier manufacturing companies," says James Lucas, analyst with Janney Montgomery Scott. Mr. Lucas spoke positively about the Danaher stock last week even after downgrading its stock from "buy" to "accumulate."

"My downgrade was based on the fact that the economy is not getting any better," Mr. Lucas said. "In fact, there are some signs it's getting worse."

Analysts at Merrill Lynch maintained a "buy" rating last Wednesday, and said in a release, "[W]e think Danaher has the best management team and operating system of the companies in our universe. In addition, we believe Danaher is the best positioned of companies we cover to negotiate challenging times."

Danaher executives view the current economic situation as an opportunity to continue its recent practice of acquiring other companies. Danaher is on the verge of completing the acquisition of Lifschultz Industries, Inc., a scientific equipment manufacturer.

Earlier this month, the company bought Microtest, Inc., a network management business, for $74 million. Executives say they hope Microtest will combine with Danaher's electronic-testing unit well enough to compete with larger rivals, including Agilent Technologies.

Mr. Lucas says Danaher's focus on external growth has not come at the expense of good internal business practices.

"They have a very detailed, balanced strategy between internal and external growth," he says. "They're continuing to fund internal growth programs."

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