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 September 30, 2004

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 November 3, 2004:

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

---

# PART IFINANCIAL INFORMATION

# Item 1. Financial
Statements

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

|                                                         | Three Months EndedSeptember 30,  2004            2003 | Nine Months EndedSeptember 30,  2004            2003 | 
|-------------------------------------------------------- | ----------------------------------------------------- | ---------------------------------------------------- | 
|
|Net sales                                                |                                                       | $924.5                                               | 
|Cost of products sold                                    |                                                       | 228.7                                                | 
|                                                        
|Gross profit                                             |                                                       | 695.8                                                | 
|Research and development                                 |                                                       | 124.4                                                | 
|Purchased in-process research and development            |                                                       | --                                                   | 
|Sales, marketing and administrative                      |                                                       | 282.1                                                | 
|Interest, net                                            |                                                       | (2.5)                                                | 
|Royalties, net                                           |                                                       | 12.6                                                 | 
|Amortization                                             |                                                       | 7.7                                                  | 
|Other, net                                               |                                                       | 5.3                                                  | 
|Litigation, net                                          |                                                       | --                                                   | 
|Restructuring charge                                     |                                                       | 66.0                                                 | 
|                                                        
|Income from continuing operations before income taxes    |                                                       | 200.2                                                | 
|Income taxes                                             |                                                       | 39.5                                                 | 
|                                                        
|Income from continuing operations                        |                                                       | 160.7                                                | 
|Loss from discontinued operations, net of income taxes   |                                                       | (7.1)                                                | 
|                                                        
|Net income                                               |                                                       | $153.6                                               | 
|                                                        
|Earnings per share-basic                                 |                                                      
|Income from continuing operations                        |                                                       | $0.51                                                | 
|Loss from discontinued operations,   net of income taxes |                                                       | (0.02)                                               | 
|                                                        
|Net income                                               |                                                       | $0.49                                                | 
|                                                        
|Earnings per share-diluted                               |                                                      
|Income from continuing operations                        |                                                       | $0.50                                                | 
|Loss from discontinued operations,   net of income taxes |                                                       | (0.02)                                               | 
|                                                        
|Net income                                               |                                                       | $0.48                                                | 
|                                                        
|Dividends declared per common share                      |                                                       | $0.10                                                | 
|                                                        

See notes to consolidated financial
statements

---

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

|                                                               | September 30,2004 | December 31,2003
|-------------------------------------------------------------- | ----------------- | ----------------
|Assets                                                         |                   | (unaudited)     
|Current Assets                                                 |                  
|Cash and cash equivalents                                      |                   | $1,441.0        
|                                                              
|Short-term investments                                         |                   | 471.7           
|Accounts receivable, net of allowances                         |                  
|of $22.8 (2004) and $24.0 (2003)                               |                   | 836.7           
|Inventories                                                    |                   | 367.9           
|Deferred income taxes                                          |                   | 322.9           
|Prepaid expenses and other current assets                      |                   | 91.8            
|Current assets of discontinued operations                      |                   | 1.9             
|                                                              
|Total Current Assets                                           |                   | 3,533.9         
|                                                              
|Other Assets                                                   |                  
|Goodwill, net of allowances of $157.9 (2004) and $157.9 (2003) |                   | 513.2           
|Other intangible assets, net of allowances of $98.9 (2004) and |                  
|$81.7 (2003)                                                   |                   | 175.7           
|Deferred income taxes                                          |                   | 2.2             
|Investments                                                    |                   | 73.1            
|Sundry                                                         |                   | 60.4            
|Other assets of discontinued operations                        |                   | 0.2             
|                                                              
|Total Other Assets                                             |                   | 824.8           
|                                                              
|Property and equipment, net of accumulated depreciation of     |                  
|$749.5 (2004) and $657.0 (2003)                                |                   | 796.3           
|                                                              
|Total Assets                                                   |                   | $5,155.0        
|                                                              

---

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

|                                               | September 30,  2004 | December 31,   2003
|---------------------------------------------- | ------------------- | -------------------
|Liabilities and Shareholders' Equity           |                     | (unaudited)        
|                                               |                    
|Current Liabilities                            |                    
|Accounts payable                               |                     | $56                
|Employee compensation                          |                     | 146                
|Other liabilities                              |                     | 324                
|Income taxes payable                           |                     | 221                
|Short-term debt                                |                     | 250                
|Current liabilities of discontinued operations |                     | 17                 
|                                              
|Total Current Liabilities                      |                     | 1,016              
|                                               |                    
|Noncurrent Liabilities                         |                    
|Long-term debt                                 |                     | 526                
|Other                                          |                     | 166                
|                                              
|Total Noncurrent Liabilities                   |                     | 693                
|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:             317,789,000 (2004)  |                    
|312,129,000 (2003)                             |                     | 493                
|Additional paid-in capital                     |                     | 293                
|Retained earnings                              |                     | 2,584              
|Deferred cost, ESOP                            |                     | (13                
|Unearned compensation                          |                     | (43                
|Treasury stock, at cost:                       |                    
|Shares:  3,158,000 (2003)                      |                     |                    
|Accumulated other comprehensive income         |                     | 129                
|                                              
|Total Shareholders' Equity                     |                     | 3,445              
|                                              
|Total Liabilities and Shareholders' Equity     |                     | $5,155             
|                                              

See notes to consolidated financial
statements

---

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

|                                                             | Nine Months EndedSeptember 30,
|------------------------------------------------------------ | ------------------------------
|                                                             |                               
|Operating Activities                                         |                               
|Net income                                                   |                               
|Adjustments to Reconcile Net Income to Cash                  |                               
|Provided by Operating Activities                             |                               
|Depreciation                                                 |                               
|Amortization of other intangible assets                      |                               
|Provision for inventory and accounts receivable              |                               
|Purchased in-process research and development                |                               
|Deferred income taxes                                        |                               
|Compensation associated with equity programs                 |                               
|Other noncash, net                                           |                               
|                                                            
|                                                             |                               
|Changes in Operating Assets and Liabilities                  |                               
|Receivables                                                  |                               
|Inventories                                                  |                               
|Prepaid expenses and other current assets                    |                               
|Accounts payable and accrued liabilities                     |                               
|Income taxes payable                                         |                               
|Other liabilities                                            |                               
|                                                            
|Net Cash Provided by Operating Activities                    |                               
|                                                            
|Investing Activities                                         |                               
|Additions of property and equipment, net                     |                               
|Acquisitions, net of cash acquired                           |                               
|Net purchases of short-term investments                      |                               
|Purchases of equity investments                              |                               
|                                                            
|Net Cash Used for Investing Activities                       |                               
|                                                            
|Financing Activities                                         |                               
|Increase (decrease) in borrowings, net                       |                               
|Issuance of common stock under stock plans and other capital |                               
|transactions                                                 |                               
|Dividends paid                                               |                               
|Repurchase of common stock                                   |                               
|                                                            
|Net Cash Provided (Used) by Financing Activities             |                               
|                                                            
|Effect of Exchange Rate Changes on Cash                      |                               
|                                                            
|Net Increase (Decrease) in Cash and Cash Equivalents         |                               
|                                                            
|Cash and Cash Equivalents at Beginning of Period             |                               
|                                                            
|Cash and Cash Equivalents at End of Period                   |                               
|                                                            

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 Annual Report on Form 10-K for
the year ended December 31, 2003. As used herein, the terms the Company and
Guidant mean Guidant Corporation and its consolidated subsidiaries.

Certain reclassifications have been
made to prior year amounts to conform to current year presentation (see Note 9).

# Note 2 
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.

|                                                 
|-------------------------------------------------
|
|                                                 
|                                                 
|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 and
          accelerated vesting of stock compensation associated with the restructuring
          (Note 10).

---

# GUIDANT CORPORATION Notes to Consolidated
Financial Statements

# Note 2 
Stock-Based Compensation (continued)

On April 1, 2004, Guidant granted
options on approximately 3.1 million shares and 610,000 restricted stock awards to over
2,500 employees. Restricted stock awards are expensed ratably over the vesting period.
Under this program, stock options will vest ratably over three years and the restricted
stock awards will vest, primarily, on April 1, 2007. For certain executive officers, the
restricted stock awards vest over six years, but may be accelerated to three-year vesting,
in 1/3 increments, upon achievement of 25%, 50% and 75% appreciation of the 60-day moving
average stock price from the date of grant ($63.11 on April 1, 2004). Grants may vest
earlier upon a qualifying disability, death, retirement or change in control.

# Note 3  Inventories

Inventories consisted of the
following:

|                              
|------------------------------
|
|                              
|Finished products             
|Work in process               
|Raw materials and supplies (1)
|                              
|                              
|                              

(1)    
          Decreased due to the lean manufacturing initiative across the cardiac rhythm
          management product lines aimed at improving inventory management.

# Note 4  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    
|                                 
|September 30                     
|                                 

---

# GUIDANT CORPORATION Notes to Consolidated
Financial Statements

# Note 5  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                                 
|                                                        

Total options outstanding at
September 30, 2004 and 2003 were 38.2 million and 46.8 million. Earnings per share-diluted
includes 34.1 million and 35.4 million stock options for the three- and nine-month periods
ended September 30, 2004 and includes 32.5 million and 24.7 million stock options for the
three- and nine-month periods ended September 30, 2003. Stock options with an exercise
price greater than the average market value stock price for the period were excluded from
the calculation of earnings per share-diluted because including them would have had an
anti-dilutive impact.

# Note 6 
Comprehensive Income

Comprehensive income is comprised of
net income adjusted for changes in foreign currency translation and unrealized gains or
losses on foreign currency derivative contracts designated and qualifying as cash flow
hedges. For the third quarters of 2004 and 2003, comprehensive income was $166.1 million
and $143.4 million. Comprehensive income for the nine months ended September 30, 2004 and
2003 was $425.4 million and $187.0 million. The increase in comprehensive income was
primarily due to higher net income in 2004 compared to 2003.

# Note 7  Segment
Information

# Geographic Information:

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

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

---

# GUIDANT CORPORATION Notes to Consolidated
Financial Statements

Note 7 - Segment Information (continued)

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



|                                     | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30,
|------------------------------------ | ------------------------------- | ------------------------------
|Classes of Similar Products:         |                                 | 2004                          
|                                    
|Net Sales:                           |                                
|Implantable defibrillator systems    |                                 | $  444.6                      
|Pacemaker systems                    |                                 | 181.2                         
|Coronary stent systems               |                                 | 122.1                         
|Angioplasty systems                  |                                 | 104.8                         
|Cardiac surgery, biliary, peripheral |                                
|and carotid systems                  |                                 | 71.8                          
|                                    
|                                     |                                 | $  924.5                      
|                                    

# Note 8 
Acquisitions

AFx, inc.: On February 9,
2004, Guidant acquired AFx, inc., a manufacturer of microwave surgical cardiac ablation
medical devices. Guidant paid $48.4 million (including transaction expenses) in cash and
forgave a $5.8 million extension of credit. The purchase price was allocated to the
acquired assets and liabilities based upon fair market values (using the income approach),
including a $22.8 million in process research and development (IPRD) charge for technology
that had not reached technological feasibility and had no alternative use and $31.6
million for intangible assets related to proven technology. In addition, a deferred tax
liability of $11.7 million was recorded for the tax effect of the intangible assets and
deferred tax assets of $11.7 million were recorded for the net operating loss carryovers.
In order to value the IPRD, a risk-adjusted discount rate of 22.5% was applied to the cash
flows. In August 2004, Guidant obtained FDA approval for the minimally invasive cardiac
ablation indication, resulting in an additional payment of $3.0 million. This payment
increased intangible assets and deferred tax liabilities by $4.8 million and $1.8 million.
Guidant may make additional milestone payments upon future satisfaction of regulatory,
clinical and sales performance criteria.

Biosensors International
(Biosensors): In March 2003, Guidant recorded a $20.5 million IPRD charge in connection with the
acquisition of certain assets
of Biosensors everolimus eluting stent program, including an exclusive worldwide
license to Biosensors polymer formulation technology in the field of everolimus
eluting stents and a nonexclusive license to use this technology with other drugs in drug
eluting stents. Additionally, as part of this consideration, Guidant acquired the option of manufacturing and
commercializing Biosensors everolimus eluting stent platform that has been used in
Biosensors FUTURE I and II Clinical Trials. In June 2003, Guidant
recorded a $10.1 million IPRD charge as a result of the achievement of a performance
milestone related to six-month clinical data of the everolimus eluting stent trial, FUTURE
I. An additional IPRD charge of $50.0 million was recorded in the second quarter of 2004
for clinical results related to Biosensors everolimus eluting stent trial, FUTURE
II. Payments were recorded as IPRD since technological feasibility of the project had not been
attained and the research had no alternative future uses.  Over the course of clinical development, Biosensors may receive additional milestone
payments. In addition, Biosensors will receive royalties on future sales of products
utilizing Biosensors technology.

---

# GUIDANT CORPORATION
Notes to Consolidated
Financial Statements

# Note 8 
Acquisitions (continued)

Bioabsorbable Vascular Solutions
(BVS): In March 2003, Guidant acquired the majority interest in BVS for $10.0 million
and accrued an additional $6.0 million for a future clinical milestone. In addition,
Guidant purchased the remaining 49% interest for $6.0 million in April 2004. All these
amounts are accounted for as IPRD, since technological feasibility of the project has not
been attained and the research has no alternative future uses. BVS is developing vascular
stent platforms designed to be absorbed by tissue following the restoration of blood flow
in patients with coronary artery disease. Guidant may pay milestone payments over the
course of clinical development.

X Technologies, Inc. (X
Technologies): In June 2003, Guidant acquired X Technologies, the manufacturer of the
FDA-approved FX miniRAIL Balloon Dilatation Catheter, a device for the treatment of
coronary artery disease. Guidant paid $60.0 million in cash and forgave a $4.5 million
extension of credit. The purchase price was allocated to the acquired assets and
liabilities based upon fair market values, including $88.7 million to intangible assets
related to developed technology and the related deferred tax liability of $32.8 million.

MediVas LLC (MediVas): In
September 2003, Guidant acquired a subsidiary of MediVas, including rights to certain
bioabsorbable polymer technologies. The agreement provided Guidant with an exclusive
worldwide license to these bioabsorbable polymer products, related pre-clinical and
clinical data, and intellectual property for use with drugs in the rolimus
family, as well as a non-exclusive license for use with other drugs. Guidant recorded a
$35.2 million IPRD charge in connection with the purchase, since technological feasibility
of the project had not been attained and the research had no alternative future uses.
MediVas may receive additional milestone payments over the course of clinical development
and receive royalties on future sales of licensed products utilizing MediVas
technology.

Novartis Pharma AG and Novartis AG
(Novartis): In 2002, Guidant entered into an agreement with Novartis that provided
Guidant an exclusive worldwide license to use everolimus in drug eluting stents. In the
second quarter of 2004, a payment of $15.0 million was made to Novartis for completion of
SPIRIT FIRST clinical trial enrollment. This amount was recorded as IPRD, since
technological feasibility of the project has not been attained and the research has no
alternative future uses. Novartis may receive additional milestone payments over the
course of clinical development and receive royalties on future sales of licensed products
utilizing everolimus.

Contingent ConsiderationCertain 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 September 30, 2004, Guidants accrual for milestone payments
totaled $33.3 million, which is expected to be paid during the next two years. In
addition, future undiscounted performance-related milestone payments of up to $258.0
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 $2.0 to $71.0 million, of which management currently estimates $30.0 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 9 
Discontinued Operations

In March 2004, Guidants Board
of Directors approved a plan to discontinue the GALILEO® Intravascular
Radiotherapy System (GALILEO System) product line for the treatment of in-stent restenosis
due to the significant competitive impact of drug eluting stents. On April 21, 2004,
Guidant signed a definitive agreement with Novoste Corporation (Novoste) to cooperate in
assisting existing US and Canadian customers of the GALILEO System who wish to transition
to Novoste products. Guidant received $2.5 million upon signing and will receive earn-out
payments up to a maximum of $4.0 million based on Novoste sales in the US and Canada. The
disposal plan consists primarily of the termination of normal activity, abandonment of
property and equipment, product returns, collection of accounts receivable and settlement
of liabilities. Net loss from discontinued operations for
the nine months ended September 30, 2004 includes a charge of $11.2 million, primarily
related to the write down of long-lived assets to fair value, severance related charges
and recording inventory and accounts receivable at net realizable value. Guidant expects
this discontinuation to be substantially complete by December 31, 2004. 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.

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 September 30, 2004, and December
31, 2003, there were $2.1 million and $36.5 million in assets and $17.9 million and $23.9
million in liabilities related to discontinued operations. Assets are primarily comprised
of accounts receivable, inventory and property, plant and equipment. Liabilities primarily
include accruals for severance, product returns, ANCURE-related settlements and lease
commitments. Net loss from discontinued operations includes charges related to the
impairment of certain long-lived assets, inventory write-downs, customer returns,
ANCURE-related settlements, employee severance and facility costs. Loss from discontinued
operations before income taxes, for the nine months ended September 30, 2003, includes a
$62.4 million charge for the previously disclosed agreement with the US Department of
Justice surrounding the ANCURE product line for the treatment of AAA.

The following summarizes financial
information for discontinued operations:

|                                                     
|-----------------------------------------------------
|
|                                                     
|                                                     
|Net sales                                            
|Loss from discontinued operations before income taxes
|Net income from discontinued operations              

(1)Represents net product returns from customers.

# Note 10 
Restructuring

On July 21, 2004 Guidants Board
of Directors approved a corporate-wide restructuring and realignment that included work
force reductions, cessation of certain capital projects and contract terminations,
resulting primarily from the weakness in the metallic coronary stent market. The pre-tax
expense associated with this plan was $66.0 million and includes severance and benefits
packages for affected employees of $42.7 million, expense associated with the accelerated
vesting of stock-based compensation (stock options and restricted stock) for affected
employees of $7.1 million, impairment of property, plant and equipment of $6.5 million,
relocation expenses of $4.4 million, contract termination costs of $3.9 million and other
related costs of $1.4 million. At September 30, 2004 the Company had a liability of $37.8
million remaining related to this restructuring (primarily recorded in other current
liabilities), the majority of which will be paid by December 31, 2004. This liability
primarily relates to severance and benefit packages that have yet to be paid.

# Note 11  Dividend

On October 18, 2004, Guidants
Board of Directors declared a fourth quarter 2004 dividend of $0.10 per common share
outstanding. The dividend will be paid on December 15, 2004 to shareholders of record on
December 1, 2004.

# 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 of 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 and related accessories for the treatment of coronary artery disease
| | - | -----------------------------------------------------------------------------------------------------------------------

| |  | Cardiac surgery systems
| | - | -----------------------

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

# Operating Results 
Three and Nine Months Ended September 30, 2004 and 2003

# Sales

Guidant reported $924.5 million in
worldwide sales for the quarter ended September 30, 2004, representing sales growth of
$4.4 million, or 0.5%, over the same period in 2003. The impact of fluctuations in foreign
currency exchange rates increased sales by $16.4 million, or 2%, offset by price and
volume declines. US sales of $638.1 million increased 1% compared to the prior year and
international sales of $286.4 million decreased 1%. Sales of products other than worldwide
coronary stent systems represented 87% of total revenues and increased 11% in the third
quarter 2004 compared to the third quarter 2003.

Sales for the nine months ended
September 30, 2004 were $2,797.4 million, an increase of $92.8 million, or 3% over the
same period in 2003. The impact of fluctuations in foreign currency exchange rates
increased sales by $66.3 million, or 2%, volume increased sales 2% and price declines
decreased sales 1%. US sales of $1,886.2 million grew 2% over the prior year primarily due
to an increase in volume, while international sales of $911.2 million increased 7%
primarily due to fluctuations in foreign currency exchange rates.

# Sales SummaryThree
Months Ended

|                                     | September 30, 2004 | September 30, 2003 | 
|------------------------------------ | ------------------ | ------------------ | 
|(In millions)                        |                    | US                 | 
|                                    
|Implantable defibrillator systems    |                    | $356.9             | 
|Pacemaker systems                    |                    | 112.1              | 
|Coronary stent systems               |                    | 60.0               | 
|Angioplasty systems                  |                    | 50.4               | 
|Cardiac surgery, biliary, peripheral |                   
|and carotid systems                  |                    | 58.7               | 
|                                    
|Total Sales                          |                    | $638.1             | 
|                                    
|                                    

# Sales SummaryNine
Months Ended

|                                     | September 30, 2004 | September 30, 2003 | 
|------------------------------------ | ------------------ | ------------------ | 
|(In millions)                        |                    | US                 | 
|                                    
|Implantable defibrillator systems    |                    | $1,044.3           | 
|Pacemaker systems                    |                    | 327.5              | 
|Coronary stent systems               |                    | 197.4              | 
|Angioplasty systems                  |                    | 155.9              | 
|Cardiac surgery, biliary, peripheral |                   
|and carotid systems                  |                    | 161.1              | 
|                                    
|Total Sales                          |                    | $1,886.2           | 
|                                    

Implantable Defibrillator
(ICD) Systems

Worldwide sales of implantable
defibrillator systems in the third quarter of 2004 were $444.6 million, an increase of 16%
over the same period in 2003. Growth was driven primarily by increased volume and a shift
toward higher-value CRT-D systems. US implantable defibrillator system sales increased 13%
to $356.9 million and international sales increased 30% to $87.7 million in the third
quarter of 2004 compared to the same period in the prior year. For the first nine months
of 2004, worldwide ICD system sales increased 19% to $1,305.3 million, compared to
$1,092.8 million for the same period in the prior year. International sales were $261.0
million in the first nine months of 2004 compared to $196.5 million in the first nine
months of 2003. Sales of ICD systems increased due to the following:

| |  | Increased awareness and adoption of
implantable defibrillator 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 implantable defibrillator 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. This trial demonstrated 20% reduction in combined all-cause death and
hospitalization by adding Guidants CRT-D systems to optimal drug therapy and 36%
reduction in all-cause mortality for Guidants CRT-D systems for patients with
advanced heart failure. Based on the results of the COMPANION trial, the FDA approved an
expanded indication for Guidant CRT-D systems in September 2004. This approval could make
CRT-D systems available to thousands more heart failure patients. Prior to this approval,
a patient needed to be indicated for both an implantable cardioverter defibrillator and
resynchronization therapy in order to receive a CRT-D system. This expands the indication
to all patients with moderate-to-severe heart failure and certain other patient
conditions.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | SCD-HeFT Clinical Trial and proposed expanded national coverage: The National Heart, Lung
and Blood Institutes SCD-HeFT clinical trial has been completed with the preliminary
clinical trial results presented in March 2004 at the American College of Cardiology
Annual Scientific Session. 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
(CMS) announced in September 2004 proposed expanded national coverage to thousands of
patients at risk for sudden cardiac death. A final decision is expected in the near
future.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | RAPIDO ADVANCE delivery system and EASYTRAK 2 and EASYTRAK 3 leads, which received FDA
approval and were launched in August 2004.
| | - | ---------------------------------------------------------------------------------------------------------------------------------

| |  | Continued acceptance of the following:
| | - | --------------------------------------

| |  | VITALITY® family of
implantable defibrillator systems, primarily the VITALITY DS and VITALITY 2
| | - | -----------------------------------------------------------------------------------------------

| |  | CONTAK
RENEWAL® family of CRT-D systems, primarily the RENEWAL 3 and RENEWAL 4
| | - | ------------------------------------------------------------------------------

In July 2004,
Guidant received Conformité Européenne (CE) Mark approval of its CONTAK
RENEWAL® 4 AVT cardiac resynchronization therapy defibrillator, designed to treat
heart failure patients who are at risk for sudden cardiac death and also suffer from
atrial arrhythmias. In May 2004 Guidant launched the VITALITY 2 implantable defibrillator
system in the US. This device incorporates Guidants RHYTHM ID® feature, which
utilizes rhythm discrimination technology to distinguish between lethal and non-lethal
heart rhythms to deliver the appropriate care.

The following may impact the
implantable defibrillator market and/or Guidants sales in the future:

| |  | Entry of a
new US competitor in the resynchronization segment in July 2004
| | - | --------------------------------------------------------------------------

| |  | Expected publication of
SCD-HeFT clinical trial results
| | - | -------------------------------------------------------

| |  | Publication of the COMPANION trial in May 2004
| | - | ----------------------------------------------

| |  | Recent expanded indication, reimbursement and pending national coverage decision all
supported by MADIT II, COMPANION and SCD-HeFT clinical trials
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

Pacemaker Systems

Worldwide pacemaker system sales were
$181.2 million for the quarter ended September 30, 2004, virtually flat compared to the
same period in the prior year. US pacemaker system sales fell 4% to $112.1 million due to
decreases in price and volume. International sales grew 7% to $69.1 million, primarily due
to fluctuations in foreign currency exchange rates. Worldwide sales of these products for
the first nine months of 2004 were $543.8 million, an increase of $30.9 million or 6% over
the same period in 2003. International sales were $216.3 million in the first nine months
of 2004 compared to $186.2 million in the first nine months of 2003. Pacemaker system
sales primarily include:

| |  | CONTAK RENEWAL TR 2 CRT-P system, launched in the third quarter of 2003 in Europe and the
CONTAK RENEWAL TR CRT-P system launched in the US in January 2004, and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | INSIGNIA family of pacemakers, including the INSIGNIA® ULTRA pacemaker system
| | - | -----------------------------------------------------------------------------

Coronary Stent Systems

Worldwide coronary stent system sales
for the third quarter of 2004 were $122.1 million, a decline of 38% compared to the third
quarter of 2003 and slightly ahead of the second quarter of 2004 sales of $120.4 million.
Coronary stent system sales comprise 13% of sales in both the second and third quarter of
2004, compared to 22% of sales in the third quarter of 2003. In February 2004, Guidant
entered into an agreement with Johnson & Johnson (J&J) to co-promote Cordis
CYPHER Sirolimus-eluting Coronary Stent (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 systems
(dilatation catheters) to J&J, are included in US coronary stent system sales.
Revenues from J&J were $29.0 million for the third quarter of 2004 compared to $11.5
million for the same period in the prior year. Coronary stent system sales in the US were
$60.0 million for the third quarter of 2004 compared to $104.3 million for the third
quarter of 2003 and $51.2 million for the second quarter of 2004. Increasing penetration
of competitive drug eluting stents in the US primarily drove the decline compared to 2003;
however, the sales increase from the second quarter of 2004 was due to increases in
co-promotion commissions and sales of stent delivery systems to J&J in the third
quarter of 2004. International sales for the third quarter of 2004 and 2003 were $62.1
million and $93.7 million. This decrease was primarily due to declining stent sales in
Japan as a result of competitive metallic stent launches since late 2003 and the launch of
CYPHER in the third quarter of 2004. Worldwide coronary stent system sales for the first
nine months of 2004 were $413.9 million compared to $642.0 million for the same period in
the prior year. International sales were $216.5 million in the first nine months of 2004
compared to $279.8 million in the first nine months of 2003. Modest sequential declines in
coronary stent system sales are expected until Guidant directly participates in the drug
eluting stent market. Coronary stent system sales in 2004 primarily include:

| |  | MULTI-LINK VISION® Coronary Stent System
| | - | ----------------------------------------

| |  | MULTI-LINK ZETA® Coronary Stent
System, which received Japan regulatory approval and was launched in July 2004
| | - | --------------------------------------------------------------------------------------------------------------

| |  | MULTI-LINK PENTA® Coronary Stent System
| | - | ---------------------------------------

| |  | MULTI-LINK PIXEL® Coronary Stent System
| | - | ---------------------------------------

| |  | MULTI-LINK MINI VISION Coronary Stent System, which received FDA approval in
September 2004
| | - | --------------------------------------------------------------------------------------------

Angioplasty Systems

Angioplasty system sales totaled
$104.8 million in the third quarter of 2004 and 2003. The absence of growth was due to
declining balloon utilization in angioplasty procedures, as physicians become more
comfortable with implanting drug eluting stents without pre-dilating the vessel. Sales of
these products for the nine months ended September 30, 2004, were $332.6 million compared
to $307.8 million for the same period in the prior year, an increase of 8%. 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.

---

Cardiac Surgery, Biliary,
Peripheral and Carotid Systems

Worldwide sales of cardiac surgery,
biliary, peripheral and carotid systems totaled $71.8 million in the third quarter of
2004, representing 41% growth over the same period in 2003. Sales for these systems during
the first nine months of 2004 were $201.8 million compared to $149.1 million for the same
period in 2003, representing a 35% increase. Sales growth was driven by:

| |  | Continued
growth in the endoscopic vessel harvesting market driven by adoption of the VASOVIEW®
Endoscopic Vessel Harvesting System
| | - | -----------------------------------------------------------------------------------------------------------------------------------

| |  | .035 Guidewire Platforms:  ABSOLUTE Self Expanding Stent and AGILTRAC Peripheral Dilatation Catheter
| | - | ------------------------------------------------------------------------------------------------------

| |  | 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; a reimbursement decision by CMS for high risk patients is
anticipated in the near future. This decision could increase the demand for these devices.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In September 2004, Guidant announced
FDA approval of the VASOVIEW 6 Endoscopic Vessel Harvesting System, a sixth-generation
product expected to be easier for physicians to use.

# Cost of Products Sold

Cost of products sold was $228.7
million and $689.6 million in the third quarter of 2004 and nine months ended September
30, 2004, compared to $216.4 million and $646.0 million for the same respective periods in
2003. Gross profit percentage was 75.3% for both the third quarter of 2004 and the nine
months ended September 30, 2004, compared to 76.5% for the third quarter of 2003 and 76.1%
for the nine months ended September 30, 2003. The decrease in gross profit percentages was
primarily driven by the decrease in sales of stents in the US and Japan, partially offset
by continued sales mix shift toward higher value implantable defibrillator systems,
including CRT-D systems. Guidant has implemented a lean manufacturing initiative across
the cardiac rhythm management product lines. Over the long term this is expected to
improve responsiveness of the supply chain and help offset the Companys decreasing
gross profit percentage due to decreasing stent sales.

# Research and Development

Research and development expense was
$124.4 million for the third quarter of 2004, or 13.5% of sales, compared to $140.7
million in the third quarter of 2003, or 15.3% of sales. The decrease is primarily related
to the restructuring, specifically the reduced employee and management bonuses in the
third quarter of 2004 compared to the same period in the prior year. Research and
development expense for the first nine months of 2004 totaled $398.8 million (14.3% of
sales) compared to $382.9 million (14.2% of sales) in the same period in 2003. Significant
investments in research and development in the first nine months of 2004 included:



| |  | Guidants drug eluting stent programs:
| | - | --------------------------------------

| |  | VISION-E Drug Eluting Coronary Stent System, which is currently being evaluated in the
SPIRIT FIRST Clinical Trial. SPIRIT FIRST is a 60-patient study utilizing a durable
polymer drug eluting stent compared to an uncoated MULTI-LINK VISION Coronary Stent
System. This program has become Guidants lead drug eluting stent program based on
the following:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Recently reported positive 6-month SPIRIT FIRST clinical results
| | - | ----------------------------------------------------------------

| |  | Manufacturing advantages of the VISION-E product compared to the CHAMPION product
| | - | ---------------------------------------------------------------------------------

---

| | The
SPIRIT FIRST clinical trials are expected to support filings to obtain regulatory approval
to market the product in the US and Europe
| | -----------------------------------------------------------------------------------------------------------------------------------------

| |  | CHAMPION Everolimus Eluting Coronary Stent System mounted on the MULTI-LINK VISION
stent delivery system. This system includes a bioabsorbable polymer matrix and has been studied in
the FUTURE family of clinical trials. Following further evaluation, Guidant has decided to stop development of the
current CHAMPION program and not move forward with Future III and IV clinical trials.  Guidant
will redirect resources from this program to VISION-E, but will continue development of the
bioabsorable polymer matrix.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | Advanced Patient Management applications, designed to enable physicians 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, biliary
and peripheral systems and cardiac surgery products
| | - | ---------------------------------------------------------------------------------------------------------------------------------

Important
research and development events in 2004 included:

| |  | SPIRIT FIRST Clinical Trial  Enrollment was completed in April 2004 and in September
2004 Guidant announced positive six-month results, including no new Major Adverse Cardiac
Events (MACE) between thirty days and six months and zero percent in-stent restenosis rate
for the everolimus eluting coronary stent arm. Angiographic in-stent late loss at six
months was 0.10 mm for the everolimus eluting coronary stent arm compared to 0.84 mm for
the control arm.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | PROSPECT (Providing Regional Observations to Study Predictors of Events in the Coronary
Tree) Study  This study is designed to increase clinical understanding of vulnerable
plaques that may cause heart attacks. In September 2004, Guidant entered into a
collaborative agreement with Volcano Therapeutics, Inc. (Volcano). As part of the
collaborative agreement, Volcano will provide equipment to be used in the study. The study
will potentially help physicians identify and treat at-risk patients before a heart attack
occurs. Enrollment for this trial began in October 2004.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Miravant Medical Technologies Agreement (Miravant)  Guidant entered into a
collaborative agreement with Miravant in July 2004 to develop photodynamic therapy for
cardiovascular applications, including potential treatments for vulnerable plaque.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | DECREASE HF Clinical Trial  Heart failure study designed to demonstrate the safety
and effectiveness of the flexible pacing modes offered in Guidants newest CRT-D
systems. Enrollment of 360 patients was completed in April 2004.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | CONTAK RENEWAL 3 AVT Clinical Trial  Study designed to determine the effect of
device therapy in patients who suffer from both heart failure and atrial arrhythmias.
Enrollment was completed in August 2004.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A collaboration agreement was signed in August 2004 with Columbia Medical Center and Stony
Brook University to study a new gene therapy that may ultimately provide a better
understanding of how genetically engineered cells can help pace the heart.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Inhibition of Unnecessary Right Ventricular Pacing with AV Search Hysteresis in
implantable defibrillators (INTRINSIC RV) Trial  This trial is a randomized trial
that includes 1,500 patients and will evaluate Guidant-exclusive technology to reduce
unnecessary right ventricular pacing in dual-chamber ICDs. Enrollment was completed in
September 2004.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Acculink for Revascularization of Carotids in High Risk Patients (ARCHeR) Clinical Trial
 Study designed to evaluate the safety and effectiveness of carotid artery stenting
as a minimally invasive alternative for treating carotid artery disease in patients
ineligible for surgery or at high surgical risk. In March 2004, the Company announced
positive one-year results for the ARCHeR 1 and 2 Clinical Trials and positive 30-day
results for the ARCHeR 3 Clinical Trial. These clinical trials supported Guidant receiving
the first FDA approval for a carotid artery stent system with embolic protection device in
August 2004. This approval will provide a minimally invasive treatment alternative to
patients that are high risk for traditional carotid artery surgery. In addition, Guidant
began enrollment in CAPTURE (Carotid ACCULINK/ACCUNET Post Approval Trial to Uncover Rare
Events) in October 2004, an FDA-required post-approval study of carotid artery stenting in
high-risk patients.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In July 2004, Guidant obtained FDA
approval for a minimally invasive cardiac ablation indication.
| | - | -------------------------------------------------------------------------------------------------

# In-Process Research and
Development (IPRD)

Guidant incurred no IPRD charges
for the three months ended September 30, 2004, compared to $35.2 million for the three months ended September 30, 2003.
For the nine months ended September 30, 2004 and 2003, Guidant recorded IPRD charges of $99.8 million
and $83.7 million. Key components of these charges include:

2004

| |  | Biosensors International (Biosensors)$50.0 million recorded during the second
quarter of 2004 in conjunction with milestones related to the FUTURE II clinical trial.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Novartis Pharma AG and Novartis AG$15.0 million payment for completion of SPIRIT
FIRST clinical trial enrollment that occurred in April 2004.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  | Bioabsorbable Vascular Solutions (BVS)$6.0 million payment to purchase the remaining
interest of BVS, an early-stage developer of bioabsorbable stents, in April 2004.
Bioabsorbable stents are designed to be absorbed by tissue following the restoration of
blood flow in patients with coronary artery disease.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | AFx, inc.$22.8 million associated with the February 2004 acquisition of AFx, inc., a manufacturer of microwave surgical
              cardiac ablation medical devices.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The remaining charges in 2004 were primarily for the purchase of technology to be utilized in
conjunction with Guidants carotid embolic protection systems.

2003

| |  | MediVas LLCIn September 2003, Guidant acquired a subsidiary of MediVas LLC,
including the right to use certain bioabsorbable polymer technologies. Guidant recorded a
$35.2 million IPRD charge in connection with the purchase.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | BiosensorsIn March 2003, Guidant purchased certain assets of Biosensors
everolimus eluting stent program, resulting in $20.5 million IPRD. In June 2003, Guidant
recorded a $10.1 million IPRD charge as a result of the achievement of a performance
milestone related to six-month clinical data of the everolimus eluting stent trial, FUTURE
I.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | BVSIn March 2003, Guidant
purchased the majority interest in BVS, resulting in a $16.0 million IPRD charge.
| | - | ------------------------------------------------------------------------------------------------------------

# Sales, Marketing and
Administrative

Sales, marketing and administrative
expenses were $282.1 million for the three months ended September 30, 2004, compared to
$300.1 million for the same period in 2003 representing a decrease of 6%. The decrease is
primarily related to the restructuring, which included a reduction in certain
discretionary expenses such as travel and advertising expenses and reduced employee and
management bonuses. Sales, marketing and administrative expenses for the nine months ended
September 30, 2004, totaled $894.9 million compared to $866.3 million for the same period
in 2003, an increase of 3%. The increase for the nine-month period was driven primarily
by compensation associated with sales growth and the increase in the cardiac rhythm
management sales force, partially reduced by the reduction in expenses associated with the
restructuring.

# Interest

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 $12.6 million in the third quarter of
2004 compared to $15.9 million for the same period in 2003. These expenses for the nine
months ended September 30, 2004, totaled $37.2 million compared to $44.9 million in the
same period in the prior year. Net royalty expense included royalty income of less than
$1.0 million in all periods presented. The decrease in royalty expense was primarily due
to the December 2003 expiration of a Mirowski patent covering certain implantable
defibrillator products. At the end of the third quarter, the Company had accrued $59.4
million, which represents all royalties and interest potentially payable under the license
agreement pertaining to that patent. The ultimate payment by Guidant will depend on a
final ruling regarding the patent. (See Part II, Item 1, Legal Proceedings.)

# Amortization

Amortization for other intangible
assets was $7.7 million in the third quarter of 2004 compared to $5.2 million in the third
quarter of 2003. These expenses for the nine months ended September 30, 2004, totaled
$22.7 million compared to $11.7 million for the same period in 2003. The increases are
attributable to the intangibles recorded in conjunction with the June 2003 acquisition of
X Technologies, Inc. and the February 2004 acquisition of AFx, inc.

---

# Other, net

Other, net expense was $5.3 million
in the third quarter of 2004 compared to $0.3 million of net other income in the third
quarter of 2003. Other, net expense for the nine months ended September 30, 2004 and 2003
was $14.2 million and $5.4 million. The additional expense in 2004 compared to 2003 is
primarily due to equity investments that were considered permanently impaired in 2004 and
an increase in losses on the disposal of fixed assets.

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

---

# Income Tax

The effective income tax rates for
the quarters ended September 30, 2004 and 2003 were 19.7% and 30.2%. The effective tax
rate is higher for the three-month period ended September 30, 2003, primarily due to
nondeductible IPRD charges in 2003 and the restructuring charge recorded in 2004 that was
primarily deductible at the US statutory rate. The income tax rates for the nine-month
periods ending September 30, 2004 and 2003 were 22.3% and 10.7%. The effective tax rate
change in 2004 was primarily due to the litigation settlement in 2003 that was deductible
at the US statutory tax rates. Guidants ongoing operations are impacted by overseas
operations having statutory tax rates that are lower than the US statutory tax rates.
Guidant is evaluating the provisions of The American Jobs Creation Act of 2004, which was
signed into law on October 22, 2004. The Act creates a temporary incentive to repatriate
foreign subsidiary earnings by providing an 85% dividends received deduction. The
deduction is subject to a number of limitations including a requirement that the
companys senior management and board of directors approve a domestic reinvestment
plan. Additional income tax expense may be recorded if Guidants Board of Directors
approves a plan to repatriate foreign earnings.

# Litigation

The Company recorded a $422.8 million
net litigation charge in the second quarter of 2003. The Company accrued $425.0 million in
that quarter based on the decision of an arbitration panel in a matter involving Cordis
Corporation. That decision became final in the third quarter of 2003, with payment made in
the fourth quarter of 2003.

# Restructuring

On July 21, 2004 Guidants Board
of Directors approved a corporate-wide restructuring and realignment that included work
force reductions, cessation of certain capital projects and contract terminations,
resulting primarily from the weakness in the metallic coronary stent market. The pre-tax
expense associated with this plan was $66.0 million and includes severance and benefits
packages for affected employees of $42.7 million, expense associated with the accelerated
vesting of stock-based compensation (stock options and restricted stock) for affected
employees of $7.1 million, impairment of property, plant and equipment of $6.5 million,
relocation expenses of $4.4 million, contract termination costs of $3.9 million and other
related costs of $1.4 million. This initiative, along with other structural spending
controls, is expected to decrease total sales, marketing, administrative and research and
development expenses in the second half of 2004 compared to the first half of 2004. In
connection with this restructuring, the Company changed its bonus programs in a manner
expected to reduce bonus compensation expense in the second half of 2004, including the
elimination of the management committee bonuses for all of 2004.

# Discontinued Operations

In March 2004, Guidants Board
of Directors approved a plan to discontinue the GALILEO Intravascular Radiotherapy System
(GALILEO System) product line for the treatment of in-stent restenosis due to the
significant competitive impact of drug eluting stents. On April 21, 2004, Guidant signed a
definitive agreement with Novoste Corporation (Novoste) to cooperate in assisting existing
US and Canadian customers of the GALILEO System who wish to transition to Novoste
products. Guidant received $2.5 million upon signing and will receive earn-out payments up
to a maximum of $4.0 million based on Novoste sales in the US and Canada. The disposal
plan consists primarily of the termination of normal activity, abandonment of property and
equipment, product returns, collection of accounts receivable and settlement of
liabilities. Net loss from discontinued operations for the nine months ended September 30,
2004 includes a charge of $11.2 million, primarily related to the write down of long-lived
assets to fair value, severance-related charges and recording inventory and accounts
receivable at net realizable value. Guidant expects this discontinuation to be
substantially complete by December 31, 2004.

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.

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.

Net loss from discontinued operations
includes charges related to the impairment of certain long-lived assets, inventory
write-downs, customer returns, ANCURE-related settlements, employee severance and facility
costs. Loss from discontinued operations before income taxes, for the nine months ended
September 30, 2003, includes a $62.4 million charge for the previously disclosed agreement
with the US Department of Justice surrounding the ANCURE product line for the treatment of
AAA. The Company expects to incur pre-tax losses of up to $10.0 million associated with
the exit of these three businesses for the remainder of 2004, excluding potential
litigation charges (see Part II, Item 1, Legal Proceedings).

The following summarizes financial
information for discontinued operations (in millions):

|                                                     
|-----------------------------------------------------
|
|                                                     
|                                                     
|Net sales                                            
|Loss from discontinued operations before income taxes
|Net income from discontinued operations              

(1)    
          Represents net product returns from customers.

# LIQUIDITY AND FINANCIAL
CONDITION

|                                                      | September 30, | December 31,
|----------------------------------------------------- | ------------- | ------------
|(Dollars in millions)                                 |               | 2004        
|                                                     
|Cash, cash equivalents and short-term investments (1) |               | $  1,912.7  
|Working capital                                       |               | $  2,517.4  
|Current ratio                                         |               | 3.5:1.0     
|Net cash position (2)                                 |               | $  1,135.8  
|Days receivable outstanding                           |               | 82          
|Inventory turnover                                    |               | 2.39        

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

| | (2) | 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. In addition, 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 September 30, 2004, Guidants accrual
for milestone payments totaled $33.3 million and will be paid during the next two years.
In addition, future undiscounted performance-related milestone payments of up to $258.0
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 $2.0 to $71.0 million, of which management currently estimates $30 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

|                                                     | Nine Months EndedSeptember 30, |        
|---------------------------------------------------- | ------------------------------ | -------
|                                                     |                                | 2004   
|                                                    
|(In millions)                                        |                               
|Net cash provided by (used for):                     |                               
|Operating activities                                 |                                | $776.8 
|Investing activities                                 |                                | (763.3 
|Financing activities                                 |                                | (32.0  
|Effect of exchange rate changes on cash              |                                | (8.7   
|                                                    
|Net increase (decrease) in cash and cash equivalents |                                | ($ 27.2
|                                                    

Net cash provided by operating
activities was $776.8 million for the first nine months of 2004, an increase of $241.1
million, primarily due to increased net income and decreases in raw material purchases and
tax payments for the nine months ended September 30, 2004 compared to the nine months
ended September 30, 2003.

Net cash used for investing
activities was $763.3 million for the first nine months of 2004, an increase of $435.1
million from the prior year primarily due to an increase of $490.0 million for purchases
of equity and short-term investments. The majority of these short-term investments are
interest-bearing investments with maturities between three and six months.

Net cash used for financing
activities was $32.0 million for the first nine months of 2004, a change of $140.8 million
from the prior year due to the following:

| |  | $250.7 million increase in net debt payments
| | - | --------------------------------------------

| |  | $117.5 million increase in repurchases of common stock
| | - | ------------------------------------------------------

| |  | $44.4 million increase in
dividend payments
| | - | -------------------------------------------

partially offset by:

| |  | $271.8 million increase in cash provided by issuances of common stock primarily for stock option exercises
| | - | ----------------------------------------------------------------------------------------------------------

Exchange rate fluctuations decreased
cash by $8.7 million for the nine months ended September 30, 2004 compared to an increase
to cash of $22.3 million for the same period in the prior year. This decrease of $31.0
million is primarily due to the Euro weakening compared to the US dollar during the nine
months ended September 30, 2004 and strengthening during the same period in the prior
year.

At September 30, 2004, the Company
had outstanding borrowings of $776.9 million at a weighted average interest rate of 2.94%,
comprised primarily of commercial paper, $350.0 million principal balance in long-term
notes due in 2006 and interest rate swap agreements valued at $5.3 million. The commercial
paper borrowings are supported by two credit facilities: a $400.0 million facility that
expires August 2007 and a $500.0 million facility that expires August 2009. There are
currently no outstanding borrowings under these facilities. The Company classified $250.0
million as short-term debt at September 30, 2004. 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 $60.0 million for
the remainder of 2004 and approximately $370.0 million for 2005. The expected increase in
capital expenditures in 2005 compared to 2004 is primarily related to investments in
manufacturing equipment and facilities to support Guidants drug eluting stent
initiatives.

The Company has recognized net
deferred tax assets aggregating $325.1 million at September 30, 2004, compared to $314.1
million at December 31, 2003. 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 Annual Report on Form 10-K and Exhibit 99 to this filing, 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
information about field observations and analyzes the observations 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-Q, the Company has not had any such field actions.

# Cautionary Factors

Certain statements made in this
report are forward-looking, including accounting estimates, statements concerning sales
and expense trends (including cost reductions), anticipated tax rates, 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:

| |  | The development of the coronary stent market: Drug eluting stents present a significant
growth opportunity; however, the earlier introduction of drug eluting stents by the
Companys competitors has substantially affected the market for metallic coronary
stents 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 cost-cutting and efficiency efforts in conjunction
with the restructuring and 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.
| | - | ----------------------------------------------------------------------

| |  | 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 filing, which is incorporated herein by reference.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 the Companys management, including
the Companys 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 Companys most
recently completed fiscal quarter that has materially affected, or is reasonably likely to
materially affect the Companys internal control over financial reporting.

Section 404 of the Sarbanes-Oxley Act
requires company management to assess and report on the companys internal controls.
It also requires a companys independent, outside auditors to issue an
attestation to managements assessment, as well as assess the proper
design and function of internal controls. Guidant is required to comply with this
requirement for the first time as of December 31, 2004. Guidant has completed the
documentation to comply with this standard and continues to work on management testing and
the external auditor attestation on Guidants internal controls.

# 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 are not
considered probable or cannot be reasonably estimated. Accordingly, the Company has not
recorded reserves 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,
except as specifically identified below, 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. Further, notwithstanding that product liability
insurance remains available to the Company on terms consistent with terms available in
prior periods, like many of its industry peers, the Company elected to increase
substantially the degree to which it self-insures for product liability exposures. The
decision does not affect coverage with respect to claims made under previous policies.

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 owned by Medtronic Vascular. 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. Pretrial matters are scheduled through 2004, with trial set in the
first quarter of 2005. This suit is one of a number of suits brought by Medtronic Vascular
under the Boneau patents against all substantial participants in the stent market. 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 June 15, 2000, Medtronic, Inc.
(Medtronic) filed a declaratory judgment action against the Company and its Cardiac
Pacemakers, Inc. (CPI) subsidiary in the District Court for Minnesota requesting that the
court rule that Medtronic does not infringe certain of CPIs patents for atrial
fibrillation technology or that the patents are not valid. Subsequently, the Company
asserted additional patents related to atrial fibrillation technology against Medtronic in
the same court. Currently, eight patents are being asserted against Medtronic in this
consolidated litigation.

On March 6, 2002, Pacesetter, Inc.
(Pacesetter), a subsidiary of St. Jude Medical, Inc. (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 motion, the case was transferred to the District Court for Minnesota and stayed in
October 2004 pending reexamination of two of the patents. The parties stipulated to lift the stay in October 2005.
Currently four patents are at issue.  Pacesetter is seeking injunctive relief, monetary damages
and attorney fees.  A new pretrial scheduling order has yet to be set.

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. Pretrial matters
are scheduled through 2004.

On June 12, 2003, the Company
announced that its subsidiary, EndoVascular Technologies, Inc. (EVT), 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 plaintiff 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. During the
quarter, a California court granted summary judgment in the Company's favor with respect
to all claims in a case against the Company that formerly alleged
violations of California unfair trade and business practice laws relating to sales of the
product, which judgment the plaintiffs have not appealed.  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 has been served with securities class action and shareholder derivative complaints
relating to the ANCURE System. A consolidated securities class action, which names as
defendants the Company, EVT and certain of their current and former officers, is pending
in the Southern District of Indiana. Generally, it is alleged that during all or a portion
of the period from June 23, 1999, through June 12, 2003, public statements by the Company
relating to the ANCURE System were false and misleading. Damages are sought on behalf of
persons who purchased or otherwise acquired Company shares during that period. The Company
has filed a motion to dismiss the case, which motion is fully briefed.

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 recently certified an issue to the Indiana Supreme
Court, which certified issue was accepted, relating to the plaintiffs obligation to
make a demand on the Companys board of directors before filing a lawsuit.

On August 29, 2003, Medtronic filed a
declaratory judgment action in the District Court for Delaware against the Company, GSC,
Eli Lilly and Company (Lilly), 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 and a bench trial was held the week of November 1, 2004.

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.

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 alleging that their Quicksite over-the-wire
pacing lead has infringed US Patent No. 5,755,766/Reexamination Certificate No. 5,755,766
C1. Pretrial matters are scheduled through 2006.

On February 24, 2004, the Company
entered into an agreement with Johnson & Johnson (J&J) to co-promote the CYPHER
Sirolimus-eluting Coronary Stent in the US. Previously, Boston Scientific Corporation
(BSC) sued J&J in the US District Court for the District of Delaware alleging that the
CYPHER stent infringes certain patents owned or licensed by BSC. On March 16, 2004, BSC
filed an amended complaint adding the Company as a defendant. Under the terms of the
agreement with J&J, J&J is required to indemnify the Company.

Anna Mirowski, Lilly 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 (288 Patent),
which was licensed to CPI and expired in December 2003, was valid and infringed by St.
Judes defibrillator products. In February 2002, the District Court reversed the
jurys findings. 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.

Item 2. Changes in Securities, Use
of Proceeds and Issuer Purchases of Equity Securities

None

# Item 6. Exhibits

The Exhibit Index is incorporated
herein by reference.

---

# 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:  November 5, 2004 |  |  |  | /s/ Keith E. Brauer         | 
|                        |  |  |  | Vice President, Finance and | 
|                        |  |  |  | Chief Financial Officer     | 
|                        |  |  |  |                             | 
|                        |  |  |  |                             | 
|Date:  November 5, 2004 |  |  |  | /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