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Intuitive Surgical (NASDAQ: ISRG) is a medical technology company that manufactures the da Vinci Surgical System, a line of robotic surgical equipment used to conduct cardiac, urological and cancer related minimally-invasive surgeries. The da Vinci Surgical System translates a surgeon's hand movements at the controls into corresponding mirco-movements of surgical instruments positioned inside a patient on the operating table, allowing for precision movement and fine surgical manipulation. Despite high upfront costs ($1.0-$1.7 million), the machine's ability to improve operating time, reduce post surgical complications and shorten hospital stays have made the system a cost effective investment among large hospitals.^[1] The company earned $1 billion in revenue and $751 million in net income in 2009.^[2]

The company expects recurring revenues from service contracts and instrument/accessories to become a larger percentage of total revenue in the future, largely due to the fact that ISRG has a only a limited number of large hospitals that are willing and able to pay for its surgical equipment. The company's future growth will depend largely on its ability to successfully expand the number of conditions that da Vinci is approved to treat. Each new condition, translates into incremental revenue from sales of new attachments needed to operate on that specific condition. Moreover, new conditions lead to greater utilization of the machines, increasing the chance that a large hospital will need to purchase a new system.

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