Medical device titan Guidant has really been feeling the heat this summer.

In June, the company was forced to recall thousands of cardiac defibrillators, products which represent nearly half of its revenue. Three months later in September, Guidant announced another recall, this time for two lines of pacemakers.

Last week, more bombs: among them, the New York Timesreported that criminal investigators have joined a U.S. Food and Drug Administration probe into how the New Brunswick, New Jersey-based company handled the recall of its heart devices. The company told the Times it had complied with FDA recall guidelines.

The mounting image problem comes as the company is in the process of being acquired by Johnson & Johnson in a $25.4-billion deal. Since June 17 when the defibrillator recall was announced, Guidant’s stock has fallen 6 percent, closing at $68.89 Friday.

Despite the hammering in the press, Wall Street analysts debate whether the recent blows will amount to a knockout punch or just a setback. Several Wall Street analysts believe the company, which posted $3.8 billion in revenue in 2004, will see its way through this bumpy period.

“We remain positive on [Guidant] shares,” SG Cowen & Co analysts wrote in a recent research note.

Part of their confidence comes from Guidant’s work on clearing up the June recall mess.

“They did a good job compensating patients,” said Mark Landy, medical analyst for Susquehanna Financial Group. The company brought the products back to market in a timeframe faster than was expected, he said.

He Said, She Said

The situation for Guidant may not be as bad as it appears. It’s not clear whether criminal investigators have actually joined the FDA to probe how Guidant reported problems with the heart devices and the efforts to fix them.

The FDA has not given Guidant any indication that it intends to launch a criminal investigation, wrote the SG Cowen analysts. And Mr. Landy said management has denied that criminal investigators are involved.

“It’s a he-said she-said situation,” said Mr. Landy. “As far as we have been told by management, Guidant hasn’t been under criminal investigation,” he said.

Guidant did not return calls seeking comment.

For Mr. Landy, the question remains: “Who are you going to believe?” he said. “Many of the markets are giving Guidant the benefit of the doubt.”

Skepticism on Deal

But not all analysts are as upbeat about Guidant’s future. Some are concerned about how the J&J merger will play out. In April, Guidant shareholders voted to accept the $25.4-billion cash and stock acquisition offer by J&J.

J&J has made few statements about its intentions but said shortly after the June recalls were announced that it planned to go through with the deal, which is expected to close in the third quarter (see J&J Sticking to Guidant Deal).

But analysts have wondered whether J&J could potentially renegotiate the deal and acquire Guidant for less than the $76 per share in cash and stock the company had offered last year.

“We have to wonder how J&J’s board can continue with this deal at the stated price as if there has been no diminished value at the company,” CIBC World Markets analysts wrote in a recent research report.