(Reuters) - Intuitive Surgical Inc (ISRG.O) estimated first-quarter revenue well below analysts' average expectation mainly due to a 60 percent drop in sales of its flagship da Vinci robot system.
The company's shares fell nearly 10 percent in extended trading.
It is unclear how the company plans to resuscitate the growth it experienced when the surgical robot system was first launched, Northland Capital Markets analyst Suraj Kalia told Reuters, considering its under-utilization in hospitals where it is currently present.
"Based on our assessment, there exists at least a 40 to 50 percent unused capacity in Da Vinci systems installed the United States; and even higher outside the U.S.," he said, saying the freshest version on the market would serve to only stratify an already saturated market.
However, other analysts believe that while underutilization exists the upgraded version of Intuitive's surgical system, launched on April 1, could revive its fortunes by opening up other markets.
"Going forward growth is to come from new markets like general surgery," Jefferies & Co analyst Imron Zafar told Reuters, but the decline in U.S. gynecology procedures, which comprise nearly half of all procedures using the robot, has clearly affected sales negatively.
Intuitive, which had experienced double-digit revenue growth and steadily rising da Vinci sales in past years, saw those trends hit a wall in 2013 in part due to media reports questioning the cost effectiveness of using the robots for certain procedures, capital spending uncertainty by hospitals, and physicians holding off on recommending prostate surgery for slower-progressing cancers.
In the fourth quarter of 2013, systems sales witnessed a 23 percent decline to $205 million.
Intuitive Surgical said it expects revenue of $465 million for the first quarter. Analysts on average were expecting sales of $537.9 million, according to Thomson Reuters I/B/E/S.
The medical device maker reported revenue of $611 million a year earlier.
Revenue from da Vinci Surgical Systems fell nearly 59 percent to about $106 million in the first quarter of 2014, Intuitive said on Tuesday.
The device maker sold 87 systems in the quarter, compared to 164 a year earlier. U.S. sales fell to 45 from 115.
The company cited lower procedural volumes, the implementation of the Affordable Care Act and expectations of a new version of the robot system for lower U.S. shipments.
The company said the revenue estimate included a $26 million deferral related to trade-in of da Vinci 'Si' systems for the upgraded version.
Intuitive Surgical said it would also record a $67 million pre-tax charge to reflect estimated costs of settling a number of claims related to its surgical robot system.
The company's shares closed at $489.84 on the Nasdaq.
Reporting by Natalie Grover in Bangalore; Editing by Sriraj Kalluvila and Cynthia Osterman