Philips to acquire Stentor

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Royal Philips Electronics and Stentor, Inc. this morning announced that Philips will acquire web-based PACS provider Stentor, the companies said in a joint release.

The acquisition is reportedly valued at approximately $280 million. Upon regulatory approval, Philips will pay cash for Stentor. The shareholders of Stentor have already approved the agreement and transaction.

Stentor is an attractive buy because its PACS business has been increasingly successful. The company has stated that it expects 2005 sales to increase as much as $50 million with 2006 sales annual growth projected at 50 percent. The cause of the growth, Stentor believes, is the company's 'pay-per-study' business model.

The company was founded in 1998 and as of March 31st employed 144 people.  Through its iSyntax technology, Stentor has created iSite PACS product line that includes the iSite Enterprise web-based image distribution system, the iSite Radiology diagnostic reading and iVault always on-line medical image storage.

The current plan is that Stentor will become part of Philip Medical System's Healthcare IT business with headquarters in Brisbane, Calif., and will become the global headquarters of Philips' overall PACS business, the companies said.

"Stentor is an exceptional company with very talented people and unique technology that will significantly strengthen our position in healthcare IT," said Jouko Karvinen, President and CEO, Philips Medical Systems, in a release. Karvinen added, "[The merger] gives us exactly what we want: world-class technology already recognized and appreciated by our customers, clear and immediate synergies with our imaging business and an opportunity to leverage the Philips world-wide resources. Philips is strongly committed to the support of its current customer base and will work with these users to let them benefit from the Stentor advantages."

In regards to the acquisition, Stentor President Oran Muduroglu said: "In the healthcare industry, Philips is known for its high-quality medical equipment and for its commitment to customers - an approach we value."

"We can now extend Stentor PACS outside of the radiology department and into other areas of the hospital where conditions like cancer and heart disease are treated," Muduroglu continued. "We are very excited about what this means for all of our current and future customers, as we combine our strengths in image and information management."

Philips current PACS partner, Sectra, today also issued a release stating that their relationship with Philips will soon change as a result of this acquisition. The two companies have had a global sales arrangement since 1997 under which Philips has sold Sectra's software for processing digital x-ray images worldwide. However, with the purchase of Stentor, Philips will now have its own ability to develop software for processing digital x-ray images, Sectra said.

"We have several project agreements with Philips that extend up to 10 years and this cooperation will successively be terminated," said Sectra President and CEO Jan-Olof Brüer. "We assess that the termination will impact on our sales and earnings in the current fiscal year. At this time, however, it is difficult to provide any reliable view of the financial effects, since this depends on how much time the termination will require."

The change provides Sectra the opportunity to review its sales channels, Sectra said. Currently, sales of Sectra PACS are handled on a proprietary basis in Scandinavia and other selected markets as well as through partners, of which Philips was the largest. Sectra's largest sales together with Philips have been in the US.

"Part of the sales for which Philips is currently responsible will be taken over by other partners that today are active in the same markets as Philips," said Brüer. "At the same time, we gain the opportunity to advance our positions and will increase our focus on own sales in important key markets, as we do today in Scandinavia, where we have captured more than half of the total PACS market."

Another major PACS player and Stentor partner, IDX Systems Corp., could not be reached for comment this morning regarding any change in its relationship with Stentor. Last November, IDX and Stentor renewed and extended their technology partnership for the delivery of integrated PACS until 2015. The partnership began in November 2000 at which time IDX's Imagecast PACS and Stentor's iSite PACS were developed with IDX's