UNDER Sir Chris O’Donnell’s leadership, Smith & Nephew has shaken off its 1990s image as a consistently underperforming healthcare group to become a fast- growing specialist supplier of replacement hips and knees.

With an ageing population keen to stay active, the orthopedics business has great long-term prospects. But despite this, S&N shares have badly underperformed the FTSE 100 since mid-2004.

Slowing growth is part of the problem. The advantage that the company gained from its hard-wearing Oxinium knees has been eroded by newer products from competitors.

Pricing pressures are a growing concern, as is a slow-burning American inquiry into the cosy relationship between the orthopedics industry and the surgeons who use its products. It is hard to believe that the Department of Justice inquiry will end happily for S&N and its rivals.

All of which might suggest that S&N should be interested in buying Biomet, a slightly larger American rival that has embarked on a strategic review after parting company with its chief executive.

Biomet, worth nearly $10 billion (£5.7 billion), is one of those that have been out-running S&N in the knees market. Nonetheless, those familiar with the British firm insist it is not that interested in a merger. Overlapping purchasing relationships apparently mean S&N would struggle to derive full benefit from buying the entire business.

More immediately, S&N’s hopes rest on imminent American approval for its Birmingham hip, a resurfacing device that spares much more of the femur than traditional hip replacements. It is launching two further hip systems this year, but it is the Birmingham hip that could make S&N’s shares fashionable once more.

Sage

WELL REGARDED though it is, Sage rarely generates much in the way of excitement. The leading supplier of accounting and management software for small businesses tends to plug away steadily, supplementing its solid organic growth with occasional small acquisitions.

The company’s £350m bid for Visma, a Norwegian rival, hit an un-Sage-like hiccup last week when, in a curiously ambivalent statement, Visma’s board withdrew its earlier recommendation of the takeover offer.

The justification for this was that some of Visma’s larger shareholders would like a higher price. Fancy that.

Fancy this, too: a large chunk of Visma’s shares are now in the hands of hedge funds.

It is to Sage’s credit that its management have resisted any temptation to sweeten the price, adopting a “take it or leave it” attitude.

Sage could still win control of Visma when its offer closes on Thursday. But its willingness to walk away rather than overpay is perhaps the more encouraging signal for investors.

Wolfson

SINCE issuing two profit warnings in 2004, Wolfson Microelectronics has enjoyed a stunning recovery. Its shares have more than quadrupled thanks to the use of its chip designs in Apple’s iPod and Sony’s Playstation Portable — last year’s two hottest electronics products.

Apple appears to have begun this year more slowly, partly because of its focus on switching over to new Intel-powered Macintosh computers. That could take some of the steam out of Wolfson’s rating, but any setback should be temporary.