Illumina Inc. (Nasdaq: ILMN) makes instruments that are used to study DNA. The company's products allow researchers to study an individual's genetic makeup, sequence genomes, and determine the specific genetic causes of diseases. Illumina's systems have three components: readers and reagents, and one-time-use arrays. Much like its competitors Affymetrix and Applera, Illumina sells the readers at low margins and generates its revenue and income from the sale of disposable arrays and reagents, which are replaced after each procedure. Each reader generates approximately $600,000 in disposables revenue per year.^[1]

Illumina has expanded its product portfolio in the last few years, with the acquisitions of CyVera in 2005 and Solexa in 2007. The fastest DNA sequencer of the last generation was the 3730xl from Applera, capable of sequencing one million bases of DNA per day. in contrast, Illumina's Genome Analyzer can sequence over 600 million bases per day.^[2] Next-generation products greatly decrease the cost of sequencing large chunks of DNA. The falling costs of sequencing have opened up new markets for companies like ILMN. The company has partnered with 23andMe, a Google financed startup that analyzes individual customers' genotypes for various diseases. That said, as of Q1 2008, most of ILMN's customers were research institutions. These institutions depend on government-funded grants which have fallen by 7.5% from 2004 to 2007.^[3]

(Read more at Wikinvest )