Barco inks agreement to buy software developer Voxar

September 29, 2004

Barco is known throughout radiology circles as a leading provider of visualization and display technology, producing gray-scale and color solutions for a range of medical imaging applications. Now the company, headquartered in Kortrijk, Belgium, is adding a completely new dimension to its product portfolio, thanks to the acquisition of 3D medical imaging software specialists Voxar.

Barco is known throughout radiology circles as a leading provider of visualization and display technology, producing gray-scale and color solutions for a range of medical imaging applications. Now the company, headquartered in Kortrijk, Belgium, is adding a completely new dimension to its product portfolio, thanks to the acquisition of 3D medical imaging software specialists Voxar.

Barco's purchase of Voxar became public knowledge on Sept. 15. Neither company has disclosed the time taken to agree to and sign the transaction. The cost of acquisition has been valued at $47 million (EUR39 million). Barco is hoping to recoup its investment through anticipated growth in demand for 3D medical imaging manipulation tools.

The acquisition should cause few changes at Voxar, according to Andrew Bissell, former CEO at Voxar and now global strategic officer with Barco's medical imaging business unit. Job losses at Voxar's offices in Edinburgh, Scotland, and Boston in the U.S. are not expected. Staff will carry on as usual, but now they are under the auspices of Barco's medical imaging business.

All software products, including Voxar's flagship 3D imaging package and its Colonscreen solution for CT colonography, will continue to be marketed under the Voxar brand. Barco intends to treat the software as a self-contained product line, said Piet Candeel, vice president of Barco's medical imaging business unit. Any software solutions developed in the future will be branded as part of Voxar.

"We are adding a new product line, a sales and marketing team and support staff, and a strong R&D group based in Edinburgh. This will be business as usual," Candeel said. "On an operational day-to-day basis, our customers are going to experience almost no change from what they have been experiencing up to now."

The decision to purchase Voxar was prompted by predicted changes to the medical imaging marketplace, according to Candeel. Consumers of display solutions are, in the future, likely to be strongly influenced by their software's functionality and Barco took steps to ensure it could deliver those solutions.

Buying Voxar also gives Barco a second customer base. To date, Barco has sold its high-end display solutions to PACS vendors and modality manufacturers. The enlarged company will now be able to offer both its own and Voxar's customers a comprehensive package of advanced visualization solutions. Voxar's existing agreements with over 30 PACS vendors mean its software could potentially be accessed from 50% of PACS workstations worldwide even now.

"This acquisition will open up new sales and business opportunities," Candeel said. "We will be able to cross-sell to the customers we have in common, including players in the global PACS market."

The acquisition also fits into Barco's ongoing strategy to grow its medical imaging business, he said. When Barco executives pinpointed the 3D software market as a major growth area, they opted to buy into the expected revenue surge through Voxar.

But Barco is not entirely reliant on new business areas to achieve its objectives for expansion, according to Candeel. The company is holding firm as a leading player in the global market for display monitors, despite increasing competition. He cites the example of Barco's latest release in this field, the Coronis 5 MP Mammo. The high-end product was launched in May in Europe as the world's first dedicated flat-panel display system for digital mammography. Barco obtained FDA 510k approval for the Coronis 5 MP Mammo in August.

"Of course pricing is going down in the monitor market. But, on the other hand, this market is growing at a tremendous pace that not many other industries are enjoying right now," Candeel said.

Yet executives have undoubtedly been swayed by Voxar's predicted performance. Founded in 1995, Voxar set out to pioneer 3D visualization of 2D radiologic slices. Rising sales figures, notably over the past year, are expected to put the business in the black for the first time in early 2005. Internal forecasts suggest double-digit growth in the coming few years, with sales of $60 million (EUR50 million) by 2007.

"Almost every month, PACS vendors have announced new levels of integration with us," Bissell said. "So we see every sign of being able to accelerate our sales growth substantially. In a business like this, the sales can scale much faster than the growth and the cost base, because we are dealing with software and there is no cost-of-goods issue.

The new union is aided by a commonality between the two company's business models, according to Bissell. Both Barco and Voxar have focused on working through partners to build sales, rather than establishing direct-sales channels. Yet he accepts that teams may have to work hard to reassure end-users that the coalition makes sense. Most important, they will need to emphasize that Voxar's overriding claim--to have a hardware-independent 3D software product--still stands, given its new ownership by a leading monitor manufacturer.

"The goal is to continue to have a preeminent software product that is capable of running anywhere," he said. "If there are later some additional synergies that can be achieved between hardware and software, we may take those, but they would be optional."

Candeel agrees that Barco has no plans to change Voxar's core philosophy on easy integration by making software deals contingent on hardware purchases. The message seems clear. Opportunities for tie-ups may still come, but not at the expense of stand-alone software sales.