UNITED STATES SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549

# FORM 10-Q

QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT
OF 1934

For the quarterly
period ended March 31, 2005

Commission File Number
1-13388

GUIDANT CORPORATION (Exact name of
Registrant as specified in its charter)

|                                |  | 
|------------------------------- |  | 
|INDIANA                         |  | 
|(State or other jurisdiction of |  | 
|incorporation or organization)  |  | 

111 MONUMENT CIRCLE,
29TH FLOOR INDIANAPOLIS, INDIANA
46204-5129(Address of principal
executive offices)

Registrants
telephone number, including area code: (317) 971-2000

Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YesX   No ___

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YesX   No ___

The number of shares of common stock
outstanding as of May 5, 2005:

|       |  | 
|------ |  | 
|Class  |  | 
|Common |  | 

---

# PART I
FINANCIAL INFORMATION

# Item 1. Financial
Statements

GUIDANT CORPORATIONConsolidated
Statements of Income (In millions, except
per share data) (unaudited)

|                                                       | Three Months EndedMarch 31, |           
|------------------------------------------------------ | --------------------------- | ----------
|
|                                                      
|Net sales                                              |                             | $   953.3 
|Cost of products sold                                  |                             | 225.3     
|                                                      
|Gross profit                                           |                             | 728.0     
|Research and development                               |                             | 129.6     
|Purchased in-process research and development          |                             |          
|Sales, marketing and administrative                    |                             | 310.3     
|Interest, net                                          |                             | (7.6      
|Royalties, net                                         |                             | 12.7      
|Amortization                                           |                             | 7.8       
|Other, net                                             |                             | (7.1      
|Impairment charge                                      |                             | 60.0      
|                                                      
|Income from continuing operations before income taxes  |                             | 222.3     
|Income taxes                                           |                             | 45.6      
|                                                      
|Income from continuing operations                      |                             | 176.7     
|Loss from discontinued operations, net of income taxes |                             | (14.4     
|                                                      
|Net income                                             |                             | $   162.3 
|                                                      
|Earnings per share-basic                               |                            
|Income from continuing operations                      |                             | $     0.55
|Loss from discontinued operations, net of income taxes |                             | (0.04     
|                                                      
|Net income                                             |                             | $     0.51
|                                                      
|Earnings per share-diluted                             |                            
|Income from continuing operations                      |                             | $     0.54
|Loss from discontinued operations, net of income taxes |                             | (0.05     
|                                                      
|Net income                                             |                             | $     0.49
|                                                      
|Dividends declared per common share                    |                             | $     0.10
|                                                      

See Notes to Consolidated
Financial Statements

---

GUIDANT CORPORATION Consolidated Balance
Sheets(In millions, except
share data)

|                                                           | March 31,2005 | December 31,2004
|---------------------------------------------------------- | ------------- | ----------------
|                                                          
|                                                           |               | (unaudited)     
|Assets                                                     |              
|Current Assets                                             |              
|Cash and cash equivalents                                  |               | $1,784.0        
|Short-term investments                                     |               | 539.0           
|Accounts receivable, net of allowances                     |              
|of $21.4 (2005) and $22.0 (2004)                           |               | 842.2           
|Inventories                                                |               | 362.6           
|Deferred income taxes                                      |               | 189.5           
|Prepaid expenses and other current assets                  |               | 75.9            
|                                                          
|Total Current Assets                                       |               | 3,793.2         
|                                                           |              
|Other Assets                                               |              
|Goodwill                                                   |               | 512.5           
|Other intangible assets, net                               |               | 101.0           
|Deferred income taxes                                      |               | 59.6            
|Investments                                                |               | 81.9            
|Sundry                                                     |               | 51.9            
|                                                          
|Total Other Assets                                         |               | 806.9           
|                                                           |              
|Property and equipment, net of accumulated depreciation of |              
|$799.2 (2005) and $780.4 (2004)                            |               | 822.3           
|                                                          
|Total Assets                                               |               | $5,422.4        
|                                                          

See Notes to Consolidated
Financial Statements

---

GUIDANT CORPORATION Consolidated Balance
Sheets(In millions, except
share data)

|                                               | March 31,2005 | December 31,2004 |  
|---------------------------------------------- | ------------- | ---------------- | -
|                                              
|                                               |               | (unaudited)      |  
|Liabilities and Shareholders' Equity           |              
|                                               |              
|Current Liabilities                            |              
|Accounts payable                               |               | $      69.6      |  
|Employee compensation                          |               | 104.5            |  
|Other liabilities                              |               | 227.7            |  
|Income taxes payable                           |               | 221.2            |  
|Short-term debt                                |               | 484.5            |  
|Current liabilities of discontinued operations |               | 29.5             |  
|                                              
|Total Current Liabilities                      |               | 1,137.0          |  
|                                               |              
|Noncurrent Liabilities                         |              
|Long-term debt                                 |               | 7.6              |  
|Other                                          |               | 234.9            |  
|                                              
|Total Noncurrent Liabilities                   |               | 242.5            |  
|                                               |              
|Commitments and Contingencies                  |              
|                                               |              
|Shareholders' Equity                           |              
|Preferred stock:                               |              
|Authorized shares:
       50,000,000           |              
|Issued shares:
                        none    |               |                 |  
|Common stock, no par value:                    |              
|Authorized shares:
  1,000,000,000             |              
|Issued shares:
             324,006,000 (2005) |              
|320,692,000 (2004)                             |              
|                                               |               | 736.6            |  
|Additional paid-in capital                     |               | 395.3            |  
|Retained earnings                              |               | 2,787.8          |  
|Deferred cost, ESOP                            |               | (11.7            | )
|Unearned compensation                          |               | (32.9            | )
|Accumulated other comprehensive income         |               | 167.8            |  
|                                              
|Total Shareholders' Equity                     |               | 4,042.9          |  
|                                              
|Total Liabilities and Shareholders' Equity     |               | $ 5,422.4        |  
|                                              

See Notes to Consolidated
Financial Statements

---

GUIDANT CORPORATION Consolidated
Statements of Cash Flows(In millions)(unaudited)

|                                                             | Three Months EndedMarch 31, |           
|------------------------------------------------------------ | --------------------------- | ----------
|
|                                                            
|Operating Activities                                         |                             |           
|Net income                                                   |                             | $    162.3
|Adjustments to Reconcile Net Income to Cash                  |                            
|Provided by Operating Activities                             |                            
|Depreciation                                                 |                             | 37.7      
|Amortization of other intangible assets                      |                             | 7.8       
|Provision for inventory and accounts receivable              |                             | 11.3      
|Purchased in-process research and development                |                             |          
|Deferred income taxes                                        |                             | (10.9     
|Compensation associated with equity programs                 |                             | 15.0      
|Impairment charge                                            |                             | 60.0      
|Other noncash, net                                           |                             | 14.2      
|                                                            
|                                                             |                             | 297.4     
|Changes in Operating Assets and Liabilities                  |                            
|Receivables                                                  |                             | (4.8      
|Inventories                                                  |                             | (22.5     
|Prepaid expenses and other current assets                    |                             | (1.5      
|Accounts payable and accrued liabilities                     |                             | (29.3     
|Income taxes payable                                         |                             | 41.9      
|Other liabilities                                            |                             | (1.7      
|                                                            
|Net Cash Provided by Operating Activities                    |                             | 279.5     
|                                                             |                            
|Investing Activities                                         |                            
|Additions of property and equipment, net                     |                             | (53.0     
|Acquisitions, net of cash acquired                           |                             | (25.0     
|Net purchases of short-term investments                      |                             | (218.9    
|Purchases of equity investments                              |                             | (0.6      
|                                                            
|Net Cash Used for Investing Activities                       |                             | (297.5    
|                                                             |                            
|Financing Activities                                         |                            
|(Decrease) increase in borrowings, net                       |                             | (166.8    
|Issuance of common stock under stock plans and other capital |                            
|transactions                                                 |                             | 126.5     
|Dividends paid                                               |                             | (32.2     
|Repurchase of common stock                                   |                             |          
|                                                            
|Net Cash (Used) Provided by Financing Activities             |                             | (72.5     
|                                                             |                            
|Effect of Exchange Rate Changes on Cash                      |                             | (19.7     
|                                                            
|Net (Decrease) Increase in Cash and Cash Equivalents         |                             | (110.2    
|                                                             |                            
|Cash and Cash Equivalents at Beginning of Period             |                             | 1,894.2   
|                                                            
|Cash and Cash Equivalents at End of Period                   |                             | $ 1,784.0 
|                                                            

See Notes to Consolidated
Financial Statements

---

GUIDANT CORPORATION Notes to Consolidated
Financial Statements (In millions, except
per share data) (unaudited)

# Note 1  Basis of Presentation

The accompanying unaudited
consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes necessary for fair presentation of
financial position, results of operations, and cash flows in conformity with accounting
principles generally accepted in the United States. Operating results from interim periods
are not necessarily indicative of results that may be expected for the fiscal year as a
whole. In the opinion of management, the consolidated financial statements reflect all
adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation of the Companys results for the periods presented. The preparation of
financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, expenses and related disclosures at the
date of the financial statements and during the reporting period. Actual results could
differ from these estimates.

For further information, including
the Companys significant accounting policies, refer to the consolidated financial
statements and notes thereto included in the Companys Form 10-K for the year ended
December 31, 2004. As used herein, the terms the Company and
Guidant mean Guidant Corporation and its consolidated subsidiaries.

# Note 2  Merger
Update

As previously announced on December
15, 2004, Guidant and Johnson & Johnson (J&J) entered into a definitive agreement
whereby J&J will acquire Guidant for $76 per share or approximately $25.4 billion in
fully diluted equity value. The announced acquisition price of $76 per share reflects
$30.40 in cash and $45.60 in J&J common stock per share, provided the volume weighted
average trading price of J&J common stock price is between $55.45 and $67.09 during
the 15-day trading period ending three days prior to the transaction closing. 
Outside this range, each Guidant share exchanged will be converted into a fixed number of
shares of J&J common stock equal to .8224 shares (at $55.45 or below) or .6797 shares
(at $67.09 or above), plus $30.40 in cash.

Merger-related milestones thus far in
2005 included US and European regulatory filings, entering the second phase of European
Commission review of the transaction and working towards a response to the second request
from the Federal Trade Commission. In addition, a special meeting of Guidant shareholders
was held on April 27, 2005, at which a majority of the shares of Company common stock
were voted to approve the merger. For purposes of the Companys stock plans, shareholder
approval constituted a change of control. As a result of this change of control, each
outstanding unvested stock option and restricted stock award granted prior to December 15,
2004 (date of the merger agreement) automatically vested. The effect of this change of
control, specifically the vesting of restricted stock awards, resulted in additional
compensation expense, including related payroll taxes, of $33.0 million to $35.0
million and will be recorded in the second quarter of 2005. The transaction remains
subject to completion of regulatory reviews as well as other customary closing conditions.

# Note 3 
Stock-Based Compensation

The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standard
(SFAS) 123, Accounting for Stock-Based Compensation, as amended by SFAS
148, Accounting for Stock-Based CompensationTransition and Disclosure.
Accordingly, the Company accounts for stock-based compensation under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees,and related
interpretations, using the intrinsic value method. The following table illustrates the
effect on net income and earnings per share if the Company had applied the fair value
recognition provisions of SFAS 123 to all stock-based employee compensation. The fair
value of stock options was estimated as of the grant date using the Black-Scholes
option-pricing model, the attribution method and a forfeiture rate of 10%. These pro forma
amounts may not be representative of the effects on reported net income for future years
due to the uncertainty of stock option grant volume and potential changes in assumptions
driven by market factors.

---

# Note 3 
Stock-Based Compensation (continued)

|                                                  | Three Months EndedMarch 31,
|------------------------------------------------- | ---------------------------
|                                                  |                            
|                                                 
|Reported net income
(1)                           |                            
|Deduct: Stock-based compensation not reflected in |                            
|net income, net of tax                            |                            
|                                                 
|Pro forma net income                              |                            
|                                                 
|Earnings per share:                               |                            
|Basic-as reported                                 |                            
|                                                 
|Basic-pro forma                                   |                            
|                                                 
|Diluted-as reported                               |                            
|                                                 
|Diluted-pro forma                                 |                            
|                                                 

(1)    
          Reported amounts include expense associated with restricted stock awards.

In December 2004, the Financial
Accounting Standards Board issued SFAS 123(R), Share-Based Payment. This Statement
is a revision to SFAS 123 and supersedes APB Opinion No. 25. SFAS 123(R) requires the
measurement of the cost of employee services in exchange for an award of equity
instruments based on the grant-date fair value of the award. On April 15, 2005, the
Securities Exchange Commission delayed the effective date of SFAS 123(R) to fiscal years
beginning on or after June 15, 2005. As a result, the Company expects to adopt SFAS 123(R)
on January 1, 2006 and recognize the fair value of the award to compensation expense over
the period during which an employee is required to provide service in exchange for the
award. No compensation cost is recognized for equity instruments for which employees do
not render service. As a result of the Companys shareholders approving the plan of
merger with J&J (See Note 2) on April 27, 2005, there are substantially no unvested
stock options outstanding as of that date. The impact to the Companys financial
statements of adopting SFAS 123(R) would depend upon future stock option grant
activity.

# Note 4  Inventories

Inventories consisted of the
following:

|                          
|--------------------------
|
|                          
|Finished products         
|Work-in-process           
|Raw materials and supplies
|                          
|                          
|                          

# Note 5  Product
Warranties

Provisions for estimated expenses
related to product warranties are recorded at the time the products are sold. Estimates
for warranty costs are calculated based primarily upon historical warranty experience, but
may include assumptions related to anticipated changes in warranty costs and failure
rates. Warranty cost accruals are adjusted from time to time when warranty claim
experience differs from estimates. A summary of the changes in the product warranty
activity is as follows:

|                                 
|---------------------------------
|
|                                 
|                                 
|January 1                        
|Provisions for product warranties
|Settlements during the period    
|                                 
|March 31                         
|                                 

---

# Note 6  Impairment
Charge

In accordance with SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, management
reassessed the expected future financial performance of the FX miniRAIL® Dilatation
Catheter, acquired from X Technologies, Inc., noting that the value of the expected future cash flows
is less than the carrying value of the related intangible asset. Among other reasons, this was the
result of (a) a decrease in demand for the product for use in treating in-stent restenosis
as drug eluting stents have reduced the incidence of this condition, and (b) demand for the
product for use in pre-dilating vessels in advance of implanting drug eluting stents not
developing as anticipated.  Based on this evaluation, the Company determined $60.0 million of
this intangible asset was no longer recoverable and was permanently impaired, resulting in
a write down to the estimated fair value of $6.1 million as of March 31, 2005. The effect
of the asset revaluation did not impact the remaining life of the intangible, but will
reduce its future amortization expense from $3.2 million to $0.3 million each quarter through
the second quarter of 2010.

# Note 7  Earnings
Per Share

The following table sets forth the
computation of earnings per share:

|                                                        
|--------------------------------------------------------
|
|
|                                                        
|Income from continuing operations                       
|Loss from discontinued operations, net of income taxes  
|                                                        
|Net income                                              
|                                                        
|Earnings per share-basic                                
|Income from continuing operations                       
|Loss from discontinued operations, net of income taxes  
|                                                        
|Net income                                              
|                                                        
|Earnings per share-diluted                              
|Income from continuing operations                       
|Loss from discontinued operations, net of income taxes  
|                                                        
|Net income                                              
|                                                        
|Weighted average common shares outstanding              
|Effect of dilutive stock options and unvested restricted
|stock awards                                            
|                                                        
|Weighted average common shares outstanding              
|and assumed conversions                                 
|                                                        

# Note 8 
Comprehensive Income

The components of comprehensive
income are as follows:

|                                              
|----------------------------------------------
|
|
|                                              
|Net income                                    
|Other comprehensive income:                   
|Currency translation                          
|Unrealized gains on foreign exchange contracts
|                                              
|Comprehensive income                          
|                                              

# Note 9  Segment
Information

# Geographic Information:

|              
|--------------
|
|
|              
|Net Sales
(1):
|US            
|International 
|              
|              
|              

(1)    
          Revenues are attributed to countries based on location of the customer.



|                            
|----------------------------
|
|                            
|Property and Equipment, Net:
|US                          
|International               
|                            
|                            
|                            

|                                         | Three Months EndedMarch 31,
|---------------------------------------- | ---------------------------
|Classes of Similar Products:             |                            
|                                        
|Net Sales:                               |                            
|Implantable defibrillator systems        |                            
|Pacemaker systems                        |                            
|Coronary stent systems                   |                            
|Angioplasty systems                      |                            
|Cardiac surgery, biliary and peripheral, |                            
|including carotid systems                |                            
|                                        
|                                         |                            
|                                        

# Note 10 
Acquisitions

AFx, inc.: On February 9,
2004, Guidant acquired AFx, inc., a manufacturer of microwave surgical cardiac ablation
medical devices, for total consideration of $54.2 million. In April 2005, Guidant made an
additional payment of $10.0 million for satisfaction of a clinical milestone related to
the development of a minimally invasive ablation procedure, which was accounted for as
IPRD. Guidant may make additional milestone payments upon future satisfaction of
regulatory, clinical and sales performance criteria.

Certain of Guidants other
acquisitions also involve contingent consideration. Contingent consideration will be
recorded when the amount is determinable and will be allocated to the fair value of the
intangibles or IPRD, with any amounts paid above fair value of identifiable assets
recorded as goodwill. In addition to contingent consideration, certain equity investments
made by Guidant in other entities may involve contingent payments, which would provide
additional ownership to Guidant (both collectively referred to as milestone
payments). These milestone payments are generally contingent upon reaching
performance-related milestones, including specified revenue levels, product development
targets or regulatory approvals or filings. At March 31, 2005, Guidants accrual for
milestone obligations totaled $8.3 million, which is expected to be paid during the next
two years. In addition, future undiscounted performance-related milestone payments of up
to $246.0 million could be paid through 2010, depending on when and if milestones are
attained. Potential milestone payments under existing agreements during the next 12 months
range from $12.5 million to $69.0 million, of which management currently estimates $53.0
million could result in IPRD charges if paid. The Company continues to evaluate business
development opportunities, which may generate additional payments.

The operating results of all
acquisitions are included in the Companys consolidated financial statements from the
date of each acquisition.

# Note 11 
Discontinued Operations

In March 2004, Guidants Board
of Directors approved a plan to discontinue the GALILEO® Intravascular Radiotherapy System
(GALILEO) product line for the treatment of in-stent restenosis due to the
significant competitive impact of drug eluting stents.

In December 2003, Guidants
Board of Directors ratified a plan to discontinue Guidants operations in Brazil due
to unfavorable business conditions and poor operating performance.

In June 2003, Guidants Board of
Directors approved a plan to dispose of the ANCURE ENDOGRAFT® System (ANCURE) product
line to treat abdominal aortic aneurysms (AAA) due to continuing financial losses, limited
prospects for the Companys AAA product line and the impact of the US Department of
Justice investigation. See Part II, Item 1, Legal Proceedings.

In accordance with SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, these disposals
represent discontinued operations. Accordingly, the accompanying consolidated financial
statements and notes reflect the results of operations and financial position of the
GALILEO and AAA product lines and the Brazil operations as discontinued operations for all
periods presented.

At March 31, 2005 and December 31,
2004, there were $29.5 million and $23.9 million in liabilities related to discontinued
operations. Liabilities primarily include accruals for severance, product returns and
ANCURE-related settlements.

The following summarizes financial
information for discontinued operations:

|                                                     
|-----------------------------------------------------
|
|                                                     
|                                                     
|Net sales(1)                                         
|Loss from discontinued operations before income taxes
|Net loss from discontinued operations                

(1)    
          Represents net product returns from customers in 2005.



# Note 12 
Contingencies

The description of legal proceedings
in Part II, Item 1, Legal Proceedings to this filing is incorporated herein
by reference.

Item 2. Managements
Discussion and Analysis of Results of Operations and Financial Condition (unaudited)

Guidant Corporation provides innovative,
therapeutic medical solutions of distinctive value for customers, patients and healthcare
systems around the world. Guidants lifesaving medical technologies are designed to
extend the lives and improve the quality of life for millions of patients suffering from
life-threatening cardiac and vascular disease. Approximately 12,000 employees develop,
manufacture and market the Companys medical devices in nearly 100 countries, with
key operations in the US, Europe and Asia. As used herein, the terms the
Company and Guidant mean Guidant Corporation and its consolidated
subsidiaries.

Cardiovascular disease is the leading
cause of death for both men and women in the US today and claims more lives each year than
the next five leading causes of death combined. Within cardiovascular disease, Guidant
develops, manufactures and markets products that focus on the treatment of cardiac
arrhythmias, heart failure and coronary and peripheral disease including:

| |  |  | Implantable
defibrillator systems used to detect and treat abnormally fast heart rhythms (tachycardia)
that could result in sudden cardiac death (SCD), including implantable cardiac resynchronization therapy defibrillator
(CRT-D) systems used to treat heart failure
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Implantable pacemaker systems used to manage slow or irregular heart rhythms
(bradycardia), including implantable cardiac resynchronization therapy pacemaker (CRT-P)
systems used to treat heart failure
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Coronary stent systems for the treatment of coronary artery disease
| | - |  | -------------------------------------------------------------------

| |  |  | Angioplasty systems, including dilatation catheters, guidewires and related accessories for the treatment of coronary artery
              disease
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Cardiac surgery systems to perform cardiac surgical ablation, endoscopic vessel harvesting
(EVH) and clampless beating-heart bypass surgery
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Peripheral systems, including those to treat biliary, peripheral vascular and carotid artery disease
| | - |  | ----------------------------------------------------------------------------------------------------

The merger update in Note 2 to the
Financial Statements is incorporated herein by reference.

# Operating Results 
Three Months Ended March 31, 2005 and 2004

# Sales

Guidant reported $953.3 million in
worldwide net sales for the quarter ended March 31, 2005, representing 2% growth compared
to the same period in 2004. Growth in unit volume favorably impacted sales by 2%, which
was partially offset by a 1% decrease in pricing. The impact of fluctuations in foreign currency
exchange rates increased sales by $12.8 million or 1%. Sales of products other than
worldwide coronary stents grew $75.4 million for the quarter ended March 31, 2005, an
increase of 10% compared to the same period in 2004. Sales growth was driven by 18% growth
in implantable defibrillator system sales and 49% growth in sales of cardiac surgery,
biliary and peripheral, including carotid systems.

---

# Sales SummaryThree
Months Ended

|                                 
|---------------------------------
|
|                                 
|(In millions)                    
|                                 
|Implantable defibrillator systems
|Pacemaker systems                
|Coronary stent systems           
|Angioplasty systems              
|Cardiac surgery, biliary and     
|peripheral, including carotid    
|systems                          
|                                 
|                                 
|                                 

Implantable Defibrillator
Systems

Sales of implantable defibrillator
systems include both sales of implantable cardioverter defibrillator (ICD) and CRT-D
systems. Worldwide sales of implantable defibrillator systems for the first quarter of
2005 were $478.0 million, an increase of $73.0 million or 18% over the same period in
2004. Growth was driven primarily by increased volume and a shift toward higher-value
CRT-D systems. US implantable defibrillator system sales increased 13% to $366.2 million,
while international sales of $111.8 million increased 38% in the first quarter of 2005
compared to the same period in the prior year. Sales of implantable defibrillator systems
increased due to the following:

| |  |  | Increased awareness and adoption of ICD and cardiac resynchronization therapies based on the following:
| | - |  | -------------------------------------------------------------------------------------------------------

| |  |  |  |  | Findings of two Guidant-sponsored clinical trials--MADIT II and COMPANION.  MADIT II demonstrated that a broader group of
patients
would benefit from ICD therapy. The investigators for the COMPANION trial reported that
for advanced heart failure patients with desynchronized heart contractions, the addition
of resynchronization therapy to optimal drug treatment reduced the combination of death
and hospitalization when compared with optimal drug treatment alone.
| |  |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  |  | SCD-HeFT clinical trial and expanded national coverage. The National Heart, Lung and Blood
Institutes SCD-HeFT clinical trial was completed in 2003 with the clinical trial
results published in the New England Journal of Medicine in January 2005. The results
demonstrated positive benefits of implantable defibrillators (reducing death by 23% versus
patients who did not receive defibrillators and only received standard drug therapy) in
patients with heart failure. Based on these results and other recent clinical trials, the
Centers for Medicare & Medicaid Services expanded national coverage to thousands of
patients at risk for sudden cardiac death in January 2005.
| |  |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | RAPIDO ADVANCE delivery system and EASYTRAK® 2 and EASYTRAK 3 leads, which
received FDA approval and were launched in August 2004. These products improve the
physicians ability to implant leads to the desired location.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Strong market acceptance for CRT-D systems, specifically the CONTAK RENEWAL® family. Sales
also benefited from continued acceptance of the VITALITY® family of implantable
defibrillator systems, specifically the VITALITY 2.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pacemaker Systems

Worldwide pacemaker system sales were
$168.1 million for the quarter ended March 31, 2005, a 6% decrease over the same period in
the prior year primarily due to volume. Sales in the US totaled $95.0 million for the
first quarter of 2005, a decrease of 9% compared to the same period in the prior year.
International pacemaker system sales declined 3% to $73.1 million for the first quarter of
2005 compared to the same period in 2004. Pacemaker system sales primarily include the
INSIGNIA® family of pacemakers. During the quarter ended March 31, 2005 there was
significant sales growth from the INSIGNIA Ultra pacemaker system, which was more than
offset by sales declines for the INSIGNIA Plus and INSIGNIA Entra pacemaker systems. The
pacemaker market has been negatively impacted, in part, by a continuing trend toward the
use of implantable defibrillators (including cardiac resychronization therapy
defibrillators) in patients who are eligible for and otherwise would have received a
pacemaker.

Coronary Stent Systems

Worldwide coronary stent system sales
for the first quarter of 2005 were $115.2 million, a decrease of 33% compared to the first
quarter of 2004. Coronary stent system sales comprised 12% of sales for the first quarter
of 2005, compared to 18% of sales for the same period in 2004. US coronary stent system
sales were $57.3 million for the first quarter of 2005 compared to $86.2 million for the
first quarter of 2004. Increasing penetration of competitive drug eluting stents in the US
primarily drove the decline compared to 2004.

International coronary stent system
sales were $57.9 million and $85.2 million for the first quarter of 2005 and 2004. This
decrease was primarily due to declining stent sales in Japan as a result of competitive
metallic coronary stent launches since late 2003 and the launch of Cordis CYPHER
Sirolimus-eluting Coronary Stent (CYPHER) in Japan during the third quarter of 2004.

In February 2004, Guidant entered
into an agreement with J&J to co-promote CYPHER. This agreement also allows for
co-promotion of future drug eluting stents sold by J&J. Co-promotion commissions
earned by Guidant under this agreement, along with sales of stent delivery technology to
J&J, arising from a prior agreement, are included in US coronary stent system sales.
Revenues from J&J were $25.6 million for the first quarter of 2005 compared to $21.1
million for the same period in 2004.

Angioplasty Systems

Angioplasty system sales totaled
$100.1 million for the first quarter of 2005 compared to $116.6 million for the first
quarter of 2004, representing a 14% decline in sales primarily due to volume. During the
second and third quarter of 2004, Guidant announced FDA approval and launched the
over-the-wire VOYAGER OTW and the rapid exchange VOYAGER RX Coronary Dilatation
Catheters. As previously disclosed, certain sizes of the VOYAGER RX were recalled in
January 2005, resulting in sales declines for this product during the first quarter of
2005. A portion of these sales was replaced with a previous generation dilatation
catheter, the CROSSSAIL® Coronary Dilatation Catheter. The VOYAGER RX was re-launched in
March 2005.

Cardiac Surgery, Biliary
and Peripheral, Including Carotid Systems

Worldwide sales of cardiac surgery,
biliary and peripheral, including carotid systems totaled $91.9 million for the first
quarter of 2005 compared to $61.6 million for the first quarter of 2004, representing 49%
growth. Sales increases were driven by the following products:

| |  |  | RX ACCULINK Carotid Stent System and the RX ACCUNET Embolic Protection System
for which Guidant was the first to receive FDA approval in August 2004
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | ABSOLUTE Biliary Self Expanding Stent System and AGILTRAC Peripheral Dilatation Catheter
| | - |  | ------------------------------------------------------------------------------------------

| |  |  | Continued growth in endoscopic vessel harvesting driven by the VASOVIEW®Endoscopic Vessel Harvesting Systems
| | - |  | ------------------------------------------------------------------------------------------------------------

# Cost of Products Sold

Cost of products sold was $225.3
million in the first quarter of 2005 compared to $226.3 million for the same period in
2004. Gross profit percentage was 76.4% for the first quarter of 2005 compared to 75.8%
for the first quarter of 2004. During the first quarter of 2005, the Companys gross
profit percentage was at the high end of its historical and anticipated near-term range.
Guidant has implemented a lean manufacturing initiative across the cardiac rhythm
management product lines. This initiative is improving responsiveness of the supply chain
and helping to offset the Companys decreasing gross profit percentage due to
decreasing stent sales.

# Research and Development

Innovation is essential to
Guidants success. It is one of the primary bases of competition in Guidants
markets. The Company works to introduce new products, enhance the effectiveness and ease
of use of existing products and expand the applications for its products. Research and
development expense was $129.6 million for the first quarter of 2005, or 13.6% of sales,
compared to $137.6 million for the same period in 2004, or 14.7% of sales. This decrease
is primarily due to higher expense associated with restricted stock awards in 2004 as
discussed below. Significant investments in research and development in 2005 included:

| |  |  | Xience V (formerly VISION®-E) Everolimus Eluting Coronary Stent System, which is
currently being evaluated in the SPIRIT family
of clinical trials, which are expected to support filings to obtain regulatory approval to
market the product in the US and Europe
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | In May 2005, Guidant received Investigational Device Exemption (IDE) conditional
approval from the FDA to begin the US portion of its pivotal SPIRIT III clinical trial
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Bioabsorbable and carotid stent systems
| | - |  | ---------------------------------------

| |  |  | Advanced Patient Management applications, designed to enable a physician to monitor
patient heart function remotely and automatically
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Clinical trials to further
demonstrate the benefits of cardiac resynchronization therapy devices for treating heart
failure
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

| |  |  | Development of next-generation devices for cardiac rhythm management,
angioplasty, biliary and peripheral systems and cardiac
surgery products
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

In addition to funding internal
research and development efforts, Guidant also invests in early-stage technologies through
equity investments, acquisitions and other collaborative vehicles.

# In-Process Research and
Development (IPRD)

Guidant incurred no IPRD charges for
the three months ended March 31, 2005. Guidant recorded $26.8 million for the three months
ended March 31, 2004, primarily related to the acquisition of AFx, inc., a manufacturer of
microwave surgical cardiac ablation medical devices.

# Sales, Marketing and
Administrative (SM&A)

SM&A expenses were $310.3 million
for the first quarter of 2005 or 32.6% of sales compared $314.7 million or 33.7% of sales
for the same period in 2004. This decrease is primarily due to higher expense associated
with restricted stock awards in 2004, as discussed below.

Total expenses for the first quarter
of 2005 and 2004 included $4.0 million and $14.7 million associated with restricted stock
awards. The expense was higher in 2004 primarily due to the accelerated vesting based upon
the attainment of Company share price appreciation targets. These expenses were classified
in the income statement consistent with the functional area of related employees.

As discussed in Note 2 to the
Financial Statements, the vesting of restricted stock awards upon shareholder approval of
the merger with J&J on April 27, 2005 resulted in additional compensation expense, including related payroll taxes
 of
$33.0 million to $35.0 million and will be recorded in the second quarter of 2005.

# Interest

Interest income increased by $9.4
million during the first quarter of 2005 compared to the same period in the prior year due
to an increase in average cash, cash equivalents and short-term investments of
approximately $728.0 million and an increase in interest rates of approximately one
percent. Interest expense increased by $2.8 million during the first quarter of 2005
compared to the same period in the prior year due to an increase in weighted average
interest rates of approximately three percent, partially offset by a decrease in the
Companys average debt balance of approximately $411.0 million.

The components of interest, net are
as follows:

|                
|----------------
|
|
|                
|Interest income 
|Interest expense
|                
|Interest, net   
|                

# Royalties

Royalty expense is incurred for sales
of certain implantable defibrillator systems, pacemaker systems, coronary stent systems
and angioplasty systems. Net royalty expense totaled $12.7 million for the first quarter
of 2005 compared to $12.1 million for the same period in 2004. Net royalty expense
included royalty income of less than $1.0 million in both periods presented. At March 31,
2005, the Company had accrued $60.9 million, which represents all royalties and interest
potentially payable under the license agreement pertaining to a Mirowski patent covering
implantable defibrillator products. The ultimate payment by Guidant will depend on a final
ruling regarding the patent. See Part II, Item 1, Legal Proceedings.

# Amortization

Amortization expense was $7.8 million
for the first quarter of 2005 compared to $7.3 million for the same period in 2004. Based
on currently recorded intangible assets, amortization expense will decrease by
approximately $2.9 million each quarter through the second quarter of 2010 due to the
impairment charge discussed below.

# Other

Net other income was $7.1 million in
the first quarter of 2005 compared to $2.5 million of net other expense in the first
quarter of 2004. The additional expense in 2004 compared to 2005 is primarily due to
equity investments that were considered permanently impaired in 2004. The additional
income in 2005 compared to 2004 is primarily due to foreign currency translation gains.

|             
|-------------
|
|
|             
|Other expense
|Other income 
|             
|Other, net   
|             

# Impairment Charge

In accordance with SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, management
reassessed the expected future financial performance of FX miniRAIL Dilatation Catheter,
acquired from X Technologies, Inc., noting that the value of the expected future cash flows is less than
the carrying value of the intangible asset. Amont other reasons, this was the result of (a) a decrease in demand
for the product for use in treating in-stent restenosis as drug eluting stents have reduced the
incidence of this condition, and (b) demand for the product for use in pre-dilating vessels
in advance of implanting drug eluting stents not developing as anticipated.  Based on this
evaluation, the Company determined $60.0 million of this intangible asset was no longer recoverable
and was permanently impaired, resulting in a write down to the estimated fair value of $6.1 million
as of March 31, 2005.  The effect of the asset revaluation did not impact the remaining life of the
intangible, but will reduce its amortization expense from $3.2 million to $0.3 million each quarter
through the second quarter of 2010.

# Income Tax

The effective income tax rates for
the quarters ended March 31, 2005 and 2004 were 20.5% and 26.4%. The effective tax rate is
lower for the first quarter of 2005 primarily due to nondeductible IPRD charges in 2004
and the impairment charge in 2005, which is deductible at the US statutory tax rates.
Guidants effective tax rate is typically lower than the US statutory tax rates
primarily due to overseas operations having statutory tax rates that are lower than the
US.

# Discontinued Operations

In March 2004, Guidants Board
of Directors approved a plan to discontinue the GALILEO Intravascular Radiotherapy System
(GALILEO) product line for the treatment of in-stent restenosis due to the
significant competitive impact of drug eluting stents.

In December 2003, Guidants
Board of Directors ratified a plan to discontinue Guidants operations in Brazil due
to unfavorable business conditions and poor operating performance.

In June 2003, Guidants Board of
Directors approved a plan to dispose of the ANCURE ENDOGRAFT® System (ANCURE) product
line to treat abdominal aortic aneurysms (AAA) due to continuing financial losses, limited
prospects for the Companys AAA product line and the impact of the US Department of
Justice investigation. See Part II, Item 1, Legal Proceedings.

In accordance with SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, these disposals
represent discontinued operations. Accordingly, the accompanying consolidated financial
statements and notes reflect the results of operations and financial position of the
GALILEO and AAA product lines and the Brazil operations as discontinued operations for all
periods presented.

At March 31, 2005 and December 31,
2004, there were $29.5 million and $23.9 million in liabilities related to discontinued
operations. Liabilities primarily include accruals for severance, product returns and
ANCURE-related settlements.

The following summarizes financial
information for discontinued operations:

|                                                     
|-----------------------------------------------------
|
|(In millions)                                        
|                                                     
|Net sales(1)                                         
|Loss from discontinued operations before income taxes
|Net loss from discontinued operations                

(1)Represents net product returns from customers.



# Liquidity and Capital
Resources

|                                                         |  |           
|-------------------------------------------------------- |  | ----------
|(Dollars in millions)                                    |  | 2005      
|                                                        
|Cash and cash equivalents and short-term investments
(1) |  | $  2,323.0
|Working capital                                          |  | $  2,656.2
|Current ratio
(2)                                        |  | 3.3:1.0   
|Net cash position
(3)                                    |  | $  1,830.9
|Days receivable outstanding                              |  | 81        
|Inventory turnover                                       |  | 2.52      

(1) Short-term investments consist primarily of highly rated commercial paper and US Government securities with maturities
         greater than three months.  Similar investments with maturities of less than three months are included in cash and cash
         equivalents.

(2) Current ratio decreased in the current quarter primarily due to $350.0 million of long-term notes (due in February 2006)
         previously classified as long-term debt.

(3) Net cash position is the sum of cash and cash equivalents
and short-term investments less total debt.

Certain of Guidants
acquisitions involve contingent consideration. Contingent consideration will be
recorded when the amount is determinable and will be allocated to the fair value of the
intangibles or IPRD, with any amounts paid above fair value of identifiable assets
recorded as goodwill. In addition to contingent consideration, certain equity investments
made by Guidant in other entities may involve contingent payments, which would provide
additional ownership to Guidant (both collectively referred to as milestone
payments). These milestone payments are generally contingent upon reaching
performance-related milestones, including specified revenue levels, product development
targets or regulatory approvals or filings. At March 31, 2005, Guidants accrual for
milestone obligations totaled $8.3 million, which is expected to be paid during the next
two years. In addition, future undiscounted performance-related milestone payments of up
to $246.0 million could be paid through 2010, depending on when and if milestones are
attained. Potential milestone payments under existing agreements during the next 12 months
range from $12.5 million to $69.0 million, of which management currently estimates $53.0
million could result in IPRD charges if paid. The Company continues to evaluate business
development opportunities, which may generate additional payments.

# Summary of Cash Flows

|                                                     | Three Months EndedMarch 31, |          
|---------------------------------------------------- | --------------------------- | ---------
|(In millions)                                        |                             | 2005     
|                                                    
|Net cash provided by (used for):                     |                            
|Operating activities                                 |                             | $   279.5
|Investing activities                                 |                             | (297.5   
|Financing activities                                 |                             | (72.5    
|Effect of exchange rate changes on cash              |                             | (19.7    
|                                                    
|Net increase (decrease) in cash and cash equivalents |                             | ($110.2  
|                                                    

Net cash provided by operating
activities was $279.5 million for the first three months of 2005, an increase of $148.3
million primarily due to:

| |  |  | $44.1 million additional tax payments during the first quarter
of 2004 compared to the first quarter of 2005
| | - |  | ------------------------------------------------------------------------------------------------------------

| |  |  | $38.9 million additional bonus payouts
during the first quarter of 2004 compared to the first quarter of 2005
| | - |  | -------------------------------------------------------------------------------------------------------------

| |  |  | $24.7 million
additional payments to vendors during the first quarter of 2004 compared to the first
quarter of 2005
| | - |  | -------------------------------------------------------------------------------------------------------------------

Net cash used for investment
activities was $297.5 million for the first three months of 2005, an increase of $183.7
million compared to the same period in the prior year primarily due to:

| |  |  | $218.9 million
net purchases of short-term investments. The majority of short-term investments are
interest-bearing investments with maturities between three and six months.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

partially offset by:

| |  |  | $25.5 million additional cash payments for acquisitions during the first quarter of 2004
compared to the first quarter of 2005. Cash payments during the first quarter of 2004
primarily relate to the acquisition of AFx, inc.; whereas, cash payments during the first
quarter of 2005 relate to a milestone payment to Biosensors International.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net cash used for financing
activities was $72.5 million for the first three months of 2005, a change of $207.2
million compared to the same period in the prior year, primarily due to:

| |  |  | $166.8 million
net payments on borrowings during the first quarter of 2005 compared to an increase in
borrowings of $76.9 million during the first quarter of 2004
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | $59.8 million decrease in cash provided by issuances of
common stock primarily for stock option exercises
| | - |  | ---------------------------------------------------------------------------------------------------------

partially offset by:

| |  |  | $97.5 million
repurchases of common stock during the three months ended March 31, 2004
| | - |  | --------------------------------------------------------------------------------------

Exchange rate fluctuations decreased
cash by $19.7 million for the three months ended March 31, 2005 compared to a decrease of
$8.0 million for the same period in the prior year due to the US dollar strengthening
relative to the Euro more during the first quarter of 2005 compared to the first quarter
of 2004.

At March 31, 2005, the Company had
outstanding borrowings of $492.1 million at a weighted average interest rate of 4.75%,
including bank borrowings, commercial paper, $350.0 million principal balance in long-term
notes due in 2006 and interest rate swap agreements valued at $0.3 million. Bank
borrowings represent short-term uncommitted credit facilities with commercial banks. The
commercial paper borrowings are supported by two credit facilities aggregating $900.0
million. There are currently no outstanding borrowings under these facilities. The Company
classified $484.5 million as short-term debt at March 31, 2005. The Company believes that
cash and cash equivalent balances will be adequate to fund maturities of short-term
borrowings, obligations to make interest payments on its debt and other anticipated
operating cash requirements, including planned capital expenditures of approximately
$372.0 million for the remainder of 2005. As previously announced, the Companys
repatriation of approximately $1.5 billion has commenced with $750.0 million received on
April 15, 2005. The Company expects an additional $750.0 million to be received later in
2005.

The Company has recognized net
deferred tax assets aggregating $249.1 million at March 31, 2005, compared to $251.3
million at December 31, 2004. In view of the consistent profitability of its past
operations, the Company believes that these assets will be substantially recovered and
that no significant additional valuation allowances are necessary.

# Field Actions

As further described in the
Companys Form 10-K and Exhibit 99 to this report, the medical device industry is
subject to substantial regulation, including by the FDA and comparable international
agencies. In addition to requiring clearance or approval to market new or improved
devices, the Company is subject to regulation as a device manufacturer. Regulations cover
many aspects of the Companys operations, including quality systems, marketing and
device reporting.

The Company continually collects and
analyzes information about product performance through field observations and other
quality metrics to determine if a field action is necessary. Following this process, from
time to time, the Company initiates field actions with respect to market-released
products. These actions may include product recalls or communications with a significant
number of physicians about a product or labeling issue. The scope of such actions can
range from very minor issues affecting a small number of units to more significant
actions. Since the Companys last filing on Form 10-K, the Company conducted the
following field action:

In May 2005, Guidant voluntarily
issued an advisory notice and labeling corrections to physicians regarding the RX ACCUNET
Embolic Protection System and is planning to update the product labeling. The
communication reinforced specific instructions for use of the device and added a warning
relating to maintaining guiding catheter support during the procedure. No product was
required to be returned. Guidant took this voluntary action as a result of reports of
separations of the RX ACCUNET filter basket from the guide wire. FDA and European
regulatory authorities have been notified of the action.

# Cautionary Factors

Certain statements included in this
filing are forward-looking, including accounting estimates, expectations with respect to
announced transactions, statements concerning pricing and sales trends, drug eluting stent
development, recovery of tax assets and the outcome of other tax matters, capital
expenditures, cash flows, costs of research programs, the timing of discontinued
operations and the timing of product developments. The statements are based on assumptions
about many important factors, including assumptions concerning:

| |  |  | Coronary stent business developments: Drug eluting stents present a significant growth
opportunity; however, the earlier introduction of drug eluting stents by the
Companys competitors has substantially affected metallic coronary stent sales and
will continue to impact the Companys financial results.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | ICD system growth driven by continued developments in future clinical science, publication
of clinical results, reimbursement decisions and new competition.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Managements progress
regarding the lean manufacturing effort across cardiac rhythm management product lines.
| | - |  | -------------------------------------------------------------------------------------------------------------

| |  |  | The effects of operating in an industry subject to complex regulation, the necessity for
appropriate reimbursement of therapies and the significance of legal claims in Guidant's industry.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Changes in the location or volume of production or changes in tax law.
| | - |  | ----------------------------------------------------------------------

| |  |  | Progress in closing the pending transaction with J&J, including satisfaction of
conditions to closing, such as regulatory approvals in the US, Europe and elsewhere, and
other customary closing conditions.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Product development and production factors (including the uncertainties associated with
clinical trials), competitive factors (including the introduction of new products and
alternative therapies), business development factors, internal factors (including the
retention of key employees and changes in business strategies) and others, all as further
described in Exhibit 99 to this report.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Actual results may differ materially.
The Company does not undertake to update its forward-looking statements.

# Item 4. Controls and
Procedures

An evaluation was carried out, under
the supervision of and with the participation of Guidants management, including the
chief executive officer (CEO) and chief financial officer (CFO), of the effectiveness of
the Companys disclosure controls and procedures as of the end of the period covered
by this report. Based on the evaluation, the CEO and CFO have concluded that the
Companys disclosure controls and procedures are effective.

There was no change in the
Companys internal control over financial reporting during the most recently
completed fiscal quarter that has materially affected, or is reasonably likely to
materially affect, internal control over financial reporting.

# PART IIOTHER INFORMATION

# Item 1. Legal Proceedings

The Company is involved in patent,
product liability, shareholder and other legal proceedings that arise in the course of the
Companys business. The Company records a liability when a loss is considered
probable and the amount can be reasonably estimated. If the reasonable estimate of a
probable loss is a range, and no amount within the range is a better estimate, the lower
end of the range is accrued. If a loss is not probable or a probable loss cannot be
reasonably estimated, no liability is recorded.

Patent and other proprietary rights
are essential to the Companys business. Significant litigation concerning patents
and products is pervasive in the Companys industry. Patent claims include challenges
to the coverage and validity of the Companys patents on products or processes as
well as allegations that the Companys products infringe patents held by competitors
or other third parties. Although the Company believes that it has valid defenses to these
challenges with respect to material patents, there can be no assurance as to the outcome
of these matters, and a loss in any of these cases could result in a loss of patent
protection or the ability to market products, which could lead to a significant loss of
sales, or otherwise materially affect future results of operations.

Losses in the matters below generally
are not considered probable or cannot be reasonably estimated. Accordingly, the Company
has not recorded material reserves, individually or in the aggregate, for these matters.
While the liability of the Company in connection with the claims cannot be estimated with
any certainty, the outcome of these legal proceedings is not expected to have a material
adverse effect on the Companys consolidated financial position, although the
resolution in any reporting period of one or more of these matters could have a
significant impact on the Companys results of operations for that period. While the
Company believes that it has valid defenses in these matters, litigation is inherently
uncertain, excessive verdicts do occur, and the Company may in the future incur material
judgments or enter into material settlements of claims.

On February 18, 1998, Arterial
Vascular Engineering, Inc. (now known as Medtronic Vascular) filed suit against the
Companys subsidiary, Advanced Cardiovascular Systems, Inc. (ACS), in the District
Court for Delaware alleging that the sale of its balloon-expandable coronary and
peripheral stents infringe the Boneau patents Medtronic Vascular claims to own. The suit
is consolidated with a suit by ACS alleging infringement by Medtronic Vascular of the
Companys Lau stent patents. The Medtronic Vascular complaint also alleges
misappropriation of trade secrets and breach of a confidentiality agreement by ACS. In the
lawsuit, Medtronic Vascular is seeking injunctive relief, co-ownership of the Lau patents,
monetary damages and a ruling that the ACS stent patents asserted against Medtronic
Vascular are invalid. This suit is one of a number of suits brought by Medtronic Vascular
under the Boneau patents against most of the substantial participants in the stent
business. The allegations made by Medtronic Vascular are wide-ranging and cover the
Companys stent products broadly. Accordingly, while potential liability cannot be
estimated with any certainty, an adverse outcome could have a material impact on results
of operations or consolidated financial position. On January 5, 2005, the court issued its
opinion on claim construction of both the Boneau and Lau patents and decided a number of
summary judgment motions filed by both parties. Among these decisions, the court ruled:
Guidants stents do not infringe the Boneau patents; Medtronics state law
claims regarding alleged misappropriation of trade secrets were time-barred due to the
statute of limitations; and Mr. Boneau was not an inventor of the Lau patents. On March
16, 2005, Medtronic filed an appeal to the US Court of Appeals for the Federal Circuit
regarding the District Courts rulings on non-infringement of the Boneau patents and
on Medtronics trade secret misappropriation claims. The Company expects to respond
appropriately to the appeal, which may be heard in late 2005 or early 2006. A jury verdict
on February 18, 2005, in the US District Court in Delaware, found that all twelve of the
accused Medtronic Vascular stent delivery system products infringe at least one of the
assserted Lau patent claims. Further, the jury verdict found that none of the asserted Lau
patent claims were invalid. A claim by Medtronic that the Lau patent claims found to be
infringed by Medtronic products are unenforceable for inequitable conduct will be
contested by the Company in a bench trial to be held in the US District Court in Delaware
in mid 2005. Assuming the asserted and infringed Lau patent claims are not found to be
unenforceable, a jury trial to determine damages based upon Medtronic Vasculars
infringement will be conducted subsequently.

On March 6, 2002, Pacesetter, Inc.
(Pacesetter), a subsidiary of St. Jude, filed suit against the Companys
subsidiaries, CPI and Guidant Sales Corporation (GSC), in the Central District of
California alleging that CPI and GSC have infringed a number of Pacesetter patents
covering various features of pacemakers and implantable defibrillators. On the
Companys motions, the case was transferred to the District Court for Minnesota and
stayed in October 2003 pending reexamination of two of the patents. The parties stipulated
to lift the stay in October 2004. Currently four patents are at issue. Pacesetter is
seeking injunctive relief, monetary damages and attorney fees. Pretrial matters are
scheduled into late 2006.

On April 14, 2003, Medinol Ltd.
(Medinol) filed suit against the Company and its ACS subsidiary in the Southern District
of New York alleging that the sale of the Companys MULTI-LINK ZETA®, MULTI-LINK PENTA®
and MULTI-LINK VISION Coronary Stent Systems infringe five Medinol patents related to
stent design. The complaint seeks injunctive relief and monetary damages. On September 30,
2004, the court issued a decision interpreting certain disputed terms in Medinols
patents. Since then, Medinol has withdrawn its infringement allegations relating to two of
the five initially asserted patents. Certain pretrial matters, including expert discovery,
are currently ongoing, although no date has been set for trial on the remaining three
patents.

On June 12, 2003, the Company
announced that its subsidiary, EndoVascular Technologies, Inc., had entered into a plea
agreement with the US Department of Justice relating to a previously disclosed
investigation regarding the ANCURE ENDOGRAFT System for the treatment of abdominal aortic
aneurysms. At the time of the EVT plea, the Company had outstanding fourteen suits
alleging product liability related causes of action relating to the ANCURE System.
Subsequent to the EVT plea, the Company has been notified of additional claims and served
with additional complaints. From time to time, the Company has settled certain of the
claims and suits for amounts that were not material to the Company. Currently, the Company
has outstanding approximately forty suits, and more suits are likely to be filed. The
cases generally allege the plaintiffs suffered injuries, and in certain cases died, as a
result of purported defects in the device or the accompanying warnings and labeling. The
complaints seek damages, including punitive damages, and equitable relief. While insurance
may reduce the Companys exposure with respect to ANCURE claims, one of the
Companys carriers, Allianz Insurance Company (Allianz), filed suit in the Circuit
Court, State of Illinois, County of DuPage, seeking to rescind or otherwise deny coverage,
and additional carriers have intervened in the case. The Company also has initiated suit
against certain of its carriers, including Allianz, in the Superior Court, State of
Indiana, County of Marion, in order to preserve the Companys rights to coverage.

Also following the EVT plea, the
Company was served with securities class action and shareholder derivative complaints
relating to the ANCURE System. The securities class action has been dismissed with
prejudice and without payment by the Company. The derivative suits relating to the ANCURE
System currently are pending in the Southern District of Indiana and in the Superior Court
of the State of Indiana, County of Marion. The suits, purportedly filed on behalf of the
Company, generally allege that the Companys directors breached their fiduciary
duties by taking improper steps or failing to take steps to prevent the ANCURE and EVT
related matters described above. The complaints seek damages and other equitable relief.
The state court suits have been stayed in favor of the federal action. The Company has
filed a motion to dismiss the federal action, which motion is fully briefed. In connection
with the briefing, the court certified an issue to the Indiana Supreme Court relating to
the plaintiffs obligation to make a demand on the Companys Board of Directors
before filing a lawsuit. The parties are awaiting a ruling on the certified issue.

On August 29, 2003, Medtronic filed a
declaratory judgment action in the District Court for Delaware against the Company, GSC,
Eli Lilly and Company, and Mirowski Family Ventures L.L.C. (Mirowski), challenging its
obligation to pay royalties to Mirowski on certain devices by alleging the invalidity of
certain claims of US patent RE 38,119 (119), which patent relates to cardiac
resynchronization therapy and bi-ventricular pacing therapy. The 119 patent is
exclusively licensed to the Company as part of a broader license covering Mirowski patents
and is sublicensed to Medtronic. The parties agreed to an expedited proceeding with
limited scope, a bench trial was held in November 2004, and the parties are awaiting a
decision.

On February 2, 2004, the Company,
GSC, CPI and Mirowski filed a declaratory judgment action in the District Court for
Delaware against St. Jude and Pacesetter alleging that their Epic HF, Atlas HF and
Frontier 3x2 devices infringe the 119 patent, described in the prior paragraph.
Pretrial matters are scheduled into 2006.

On February 24, 2004, the
Companys subsidiary, CPI, filed a patent infringement action in the District Court
of Minnesota against St. Jude and Pacesetter. In the Companys complaint, as amended,
CPI and GSC allege that St. Judes Quicksite over-the-wire pacing lead infringes US
Patent No. 5,755,766/Reexamination Certificate No. 5,755,766 C1. Pretrial matters are
scheduled into 2006.

On February 24, 2004, the Company
entered into an agreement with J&J to co-promote the CYPHER Sirolimus-eluting Coronary
Stent in the US. Previously, Boston Scientific sued J&J in the US District Court for
the District of Delaware alleging that the CYPHER stent infringes four patents owned or
licensed by Boston Scientific. On March 16, 2004, Boston Scientific filed an amended
complaint adding the Company as a defendant. On March 11, 2005, Boston Scientific
dismissed all of its claims relating to three of the four asserted patents. Trial on the
one remaining patent is scheduled for fall 2005. Under the terms of the Companys
agreement with J&J, J&J is required to indemnify the Company.

Mirowski and two Company
subsidiaries, GSC and CPI, are plaintiffs in a patent infringement suit originally filed
against St. Jude and its affiliates in November 1996 in the District Court in
Indianapolis. In July 2001, a jury found that US Patent No. 4,407,288, which was licensed
to CPI and expired in December 2003, was valid but not infringed by St. Judes
defibrillator products. In February 2002, the District Court reversed the jurys
finding of validity. In August 2004, the Federal Circuit Court of Appeals, among other
things, reinstated the jury verdict of validity and remanded the matter for a new trial on
infringement and damages. St. Judes request for additional Federal Circuit review
was denied, and the case has been sent back to the District Court for further proceedings.
St. Jude has also sought review of the Federal Circuits decision in the US Supreme
Court. A new trial in the District Court has been scheduled for early 2006.

On December 8, 2004, Scimed Life
Systems, Inc. (Scimed), a subsidiary of Boston Scientific, filed suit against the Company
and the Companys subsidiaries, ACS and GSC, in the District of Minnesota alleging
that ACS and GSC have infringed three of Scimeds patents covering various features
of embolic protection systems. Scimed is seeking injunctive relief, monetary damages and
attorney fees. Pretrial matters are scheduled into 2006.

In April, 2005, Joseph Kopstein filed
suit against the Company, as the successor to X Technologies, Inc., and several other
defendants in the Superior Court of the State of California, County of San Diego,
alleging, among other things, breach of contract and fraud related to shares that he held
in X Technologies. X Technologies was acquired by the Company in June of 2003. See Note 6
to the Consolidated Financial Statements.

# Item 6. Exhibits

The Exhibit Index is incorporated
herein by reference.

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# SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

|                  |  |  |  | GUIDANT CORPORATION         | 
|----------------- |  |  |  | --------------------------- | 
|                  |  |  |  | (Registrant)                | 
|                  |  |  | 
|                  |  |  | 
|Date: May 6, 2005 |  |  |  | /s/ Keith E. Brauer         | 
|                  |  |  |  | Vice President, Finance and | 
|                  |  |  |  | Chief Financial Officer     | 
|                  |  |  | 
|                  |  |  | 
|Date: May 6, 2005 |  |  |  | /s/ Peter J. Mariani        | 
|                  |  |  |  | Vice President, Corporate   | 
|                  |  |  |  | Controller and Chief        | 
|                  |  |  |  | Accounting Officer          | 

---

# EXHIBIT INDEX

Exhibit 31.1: 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of Ronald W. Dollens

Exhibit 31.2: 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of Keith E. Brauer

Exhibit 32.1: 
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of Ronald W. Dollens

Exhibit 32.2: 
  Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of Keith E. Brauer

Exhibit 99:    
    Factors Possibly Affecting Future Operating Results