August 18, 2008

1. German Re-Engineering: Siemens Corporate Layoffs Whack Hundreds in PA

Facts and Background

Siemens Medical Solutions announced Friday that it had begun laying off 350 healthcare IT employees in its Great Valley, PA headquarters, nearly 10% of the workforce at that location. The reduction was part of a plan announced in July by its German industrial conglomerate parent, Siemens AG, to trim headcount by nearly 17,000 to increase global competitiveness.

Opinion

Nobody should be surprised. Siemens is reeling from an admitted history of corporate bribery and getting trounced by cheaper Asian competitors in key segments. Rumors have been that Soarian is eating huge amounts of cash with minimal return. As a percentage, it's more selective surgery than bloodbath, but high profile since SMS and Malvern are part of the historical fabric of the healthcare IT industry even though recent successes have been modest.

Musings

• Siemens cut 4.2% of its overall workforce but nearly 10% in Malvern, suggesting that performance of the medical solutions business was perceived as troubling.
• Rumors are that the Soarian group, with staff in both in the US and India, took the biggest hit.
• A minimally noticed problem is that Germany's economy is contracting and on the brink of recession, so it's not exactly a bed of roses back home in Berlin and Munich, either.
• The bribery scandal may not be over, as Argentine authorities raided the local headquarters of Siemens this weekend to investigate corruption from the 1990s.
• Worldwide, Siemens has been selling off assets and businesses, although healthcare has been a stated focus for long-term growth (although its medical technology and healthcare IT businesses aren't necessarily inseparable).
• Siemens bought the former Shared Medical Systems in May, 2000 via its Medical Engineering group, spending around $2 billion for what it hoped was a high-tech, fast-growing business in a thriving industry. SMS had turned down an offer of 10% less from Eclipsys the month before. Most would say its track record since has been underwhelming.

2. MyWay or the Highway? iMedica Gives Misys the Answer: B

Facts and Background

Misys PLC announced Tuesday that its Misys Healthcare Systems business unit was negotiating with physician systems vendor iMedica to resolve a dispute over last year's agreement in which Misys licenses and resells iMedica's systems under the MyWay name. The company said that iMedica had sent a notice of termination of the agreement for unstated reasons.

Opinion

Was it a good idea to base the entire division's future on relabeling another company's software instead of actually creating value through innovation? Maybe not.

Musings

• iMedica is holding all the high cards here, most likely threatening to lay them down because of some anticipated threats from the impending Allscripts-Misys merger.
• Misys says it has the right to continue selling iMedica's product while the dispute is being addressed.
• The company says there would be no impact should the agreement be terminated. That's either a positive spin on a dire situation or an admission that Misys struck a bad deal and can't sell the product.
• The original agreement was announced on August 28, 2007. Misys basically admitted that it didn't have a competitive product for the biggest growth area, small physician practices, turning itself into a dealer for iMedica's product while still openly competing with iMedica.
• The Misys-Allscripts merger is expected to be completed by the end of the year, which would have made the iMedica arrangement awkward in any case since Allscripts has several physician products that include those for small practices.
• iMedica CEO Michael Nissenbaum, in an HIStalk interview last month, stated that Misys was selling the iMedica product unchanged and that he considered both Misys and Allscripts to be "tooth and nail" competitors.

3. Perot Makes Giant Acquisition Sucking Sound

Facts and Background

Perot Systems CEO Peter Altabef told a Reuters interviewer on Friday that slowdowns in big healthcare contracts had led it to focus on "an acquisition in the healthcare space from anywhere in the world." No further details were provided.

Opinion

Perot sells mostly to providers, so the slowdown isn't too surprising. Despite growth concerns, shares are at a 52-week high, so it's a good time to go shopping.

Musings

• Perot beat analyst estimates in its Q2 report from the end of July, but lowered guidance.
• Perot acquired Meditech consultants JJWild a year ago for $89 million.
• If the consulting business is drying up, that leaves two options in sticking with healthcare like the CEO said: (a) go overseas, or (b) acquire a company that's in healthcare, but not in consulting.
• Perot's earnings call from July expresses hope about getting VA business, which would have big enough dollar value to interest a company like Perot, which doesn't usually do small deals. The VA has many systems options on the table (DoD, VistA enhancement, Healthevet, Cerner, etc). although Perot's lobbying expenditures are, surprisingly, minimal. Reading between the lines suggests that Perot may be inline for some big VA contracts, although it has to compete with the usual big-ticket suspects like SAIC and Northrop-Grumman.

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