Philips and AT&T have agreed to restructure their CommView joint venture for the supply of picture archiving and communications systems technology. Details of the new structure have not been finalized, said Michael P. Moakley, president and CEO of Philips Medical Systems North America of Shelton, CT. The two firms remain committed to PACS, although they have not been satisfied with the commercial results of their four-year-long effort.
CommView focused initially on the development of comprehensive digital radiology departments, but hospitals proved reluctant to spend large sums of money on technology that could become outdated and did not provide a new source of revenue. The two companies eventually acknowledged the need to focus on "miniPACS" solutions targeted at specific department requirements.
The day of comprehensive digital medical imaging will arrive eventually, Moakley said. "There is no doubt it will catch on. The question is when," he said.
The reorganization will create a single research and engineering effort for CommView and reduce redundant expenses at both companies. Resources will also be focused more clearly on marketing existing PACS products, Moakley told SCAN.
Coincidentally with the decision to restructure CommView, AT&T decided to withdraw its bid for the medical diagnostic imaging system (MDIS) project of the Department of Defense (SCAN 2/26/90). The decision to withdraw from MDIS will prevent the diversion of resources from support of existing CommView products, said Stephen G. Chappell, director of AT&T Medical Systems.
"Significant new technology development would have been required in order to meet their (the Defense Department's) requirements. Prospective revenues didn't support the development program we would have had to put together. It just didn't make good business sense," Chappell said.
Advanced Video Products of Littleton, MA, and a partnership of Siemens and Loral Aerospace of San Jose, CA, are two remaining bidders on MDIS. Both AVP and Siemens continued acknowledge that the cost of bidding and fulfilling the MDIS contract are extensive, while possible revenues are uncertain.
"It (the MDIS contract) is potentially quite large, but the request for proposals was worded in an ID/IQ (indefinite delivery/indefinite quantity) manner. They don't have to buy anything they don't want," said John Perry, vice president of the computer systems division at Siemens Gammasonics of Hoffmann Estates, IL. "This is our first military bid response in the PACS business, and it is true that there was much effort required. It absorbed most of our senior technical and marketing people for months."
The war in the Middle East has amplified the uncertainty involved with MDIS. Many of the personnel behind the project have been diverted for an indefinite period, said Henry Kunicki, director of sales for AVP.
"MDIS and anything else (involved with military contracts) takes a back seat to what is happening in the Persian Gulf," he said. "I had expected movement in other (projects), but almost everything is on the shelf."
The MDIS contract is a negotiated one, Kunicki said. The military is not required to accept a bid and can walk away from the project if it finds all bids unacceptable, he said. This fact enhances the risk for vendors.
THE RESTRUCTURING OF COMMVIEW is in accordance with an effort by Philips to bring its PACS investment in line with market realities, Moakley said.
"We are in the process of resizing the entire PACS effort in proportion to the market opportunity as we now understand it. The market has not proved as big as we had hoped it would be after four years of effort. We are bringing a fresh business approach to the entire PACS/PCR (Philips computed radiography) effort," he said.
The overall medical systems picture for PMSNA was bright last year, however, he said. Sales grew by 14% over 1989.
"We had record sales in 1990 and an excellent order performance across the board. We see no sign of a downturn in either orders or sales," Moakley said.
NV Philips, the Dutch parent of Philips Medical Systems International, is engaged in a corporate-wide restructuring effort, however, which will result in a decline in medical staff of about 1500 people. Most of the reductions are occurring in Europe. PMSI has closed plants in France and Italy and is consolidating operations between Best, the Netherlands, and Hamburg, Germany, Moakley said.
PMSNA, on the other hand, expects to have a net decrease in personnel of only 60 this year. The North American unit will actually be rebuilding its staff following a trimming of 150 positions this month, he said.
"There will be a regrowth in areas, particularly service and ultrasound," he said. "I am going to redeploy (resources) into other areas of the business."
PMSNA should finish the year out with over 2400 employees. Fewer cuts were needed in North America this year, because the operations here were restructured significantly in 1989, he noted.
