As its ticker suggests, Advanced Medical Optics (EYE) manufactures medical devices for the eye. Its products range from simple contact lens cleaning solution to lens implants for cataracts and devices used in laser vision correction surgery. About half of all sales in 2006 came from its cataract division. Spun off from Allergen in 2002, Advanced Medical Optics has since grown through strategic acquisitions. It has nearly doubled its sales from 2002 to 2006, when it generated revenues of approximately $1 billion.
As a company dependent on cataracts patients, the company is positioned to benefit from the aging of baby boomers in the U.S. Adults between the ages of 52-64 have a 50% chance of getting a cataract, and, by age 75, virtually everyone suffers from the condition. Based on U.S. census demographics, the number of boomers over the age of 65 will increase 20% in 2030 to 69 million individuals.
Its dependence on the cataracts industry (it makes half of its revenues from it) is tempered by negative trends in its other divisions. Laser vision correction is not covered by Medicare, Medicaid or most private insurance plans so demand for the expensive procedure tends to be correlated with economic conditions. The number of LASIK procedures from 2004 to 2006 has been flat at 1.3 million per year. In addition, the company's contact lens solution is a peroxide-based product, which have rapidly lost ground to less expensive and easier-to-use "no rub" solutions.
Spun off from Allergen in 2002, Advanced Medical Optics manufactures medical products for the eye along three product lines:
AMO's three product lines are complementary, allowing for cross marketing efforts.  Furthermore, seasonal sales trends in all three product lines tend to be balance each other out. For instance, cataract/implant business sales are usually low in the first quarter and gradually increase throughout the rest of the year. In the laser vision correction business, however, the highest portion of sales is concentrated in the first quarter. Combining these product lines smooths earnings throughout the year.
Company revenues have grown from $538.1 million in 2002, (when it became an independent public company), to $997.5 million in 2006, implying an annual growth rate of 16.7%. Revenue growth was bolstered partly by acquisitions, most notably that of Pfizer’s ophthalmic surgical business in 2004 and VISX (the leading manufacturer of LASIK equipment) in 2005. Primary drivers of 8.3% revenue growth and 18.6% operating income growth from 2005 to 2006 included the full-year impact of the VISX acquisition and international expansion of the laser vision correction business. 
Advanced Medical Optics (AMO) competes in three segments of the ophthalmic market – cataract/implant, laser vision correction and eye care. AMO is one of the top three players in the industry, with ALCON (ACL) and Bausch & Lomb (BOL) its primary competitors. Smaller firms that compete with AMO in only one or two markets include STAAR Surgical Company (STAA), Eyeonics, Japanese companies Hoya and Santen, German company Zeiss-Meditec, and Corneal. One of the company's primary competitive advantages is its large global network, as the company makes more sales outside of the U.S. (58% of 2006 sales from international). Additionally, after the acquisition of VISX, the company's laser vision correction business is the world’s largest (see chart below).
However, AMO is smaller in size than its main competitors, and thus has access to fewer resources in areas such as R&D, marketing and sales, which hurts its competitiveness.