Del sees room for revenue growth through low-cost imaging systems

Company eyes more acquisitions after buying Acoma

High-flying technologies like MRI and CT may earn most of the attention in medical imaging, but Del Global Technologies sees the x-ray market as its bread and butter. The Valhalla, NY, company has an impressive track record of growth in the radiography segment over the past six years and is planning to grow bigger this year through a combination of acquisitions and internal growth.

Del was primarily a manufacturer of power conversion systems when it bought small x-ray and mammography firm DynaRad in 1992. Since then, Del has boosted its presence in medical imaging through an acquisition every few years, with the biggest transaction being its purchase of Gendex in March 1996.

In December, Del purchased the x-ray assets of Acoma Medical Imaging of Wheeling, IL, for $1.4 million over three years (SCAN 12/16/98). That deal brought Del into the radiography-fluoroscopy market for the first time by giving it access to a cost-effective R/F system manufactured by Acoma. The agreement is the latest example of a strategy that Del has used to grow its medical imaging business, according to Leonard Trugman, president, chairman, and CEO of the company.

"The strategy is to buy niche technology that allows us to broaden our medical systems offerings," Trugman said. "We believe we've bought a cost-effective R/F system that will be serving niche markets in the U.S. as well as abroad."

Del is eyeing other potential acquisitions, both in the U.S. and internationally, as the company seeks to expand. In addition to x-ray, Del is interested in entering the market for ultrasound technology, because of that modality's ability to provide low-cost imaging. Markets Del will not enter include MRI, CT, and nuclear medicine, or the premium ultrasound segment, Trugman said.

Another recent Del initiative is the restructuring of its medical operations to include all its imaging businesses under the Del Medical Systems umbrella. These companies include Gendex-Del, DynaRad, and Universal, as well as X-Ray Technologies, a manufacturer of small x-ray systems for the chiropractic, veterinary, and small practice markets. David Engel, formerly Del's corporate executive vice president, has been named president of the group.

The restructuring highlights the progress Del has made in diversifying from a supplier of power conversion components into a manufacturer of complete imaging systems. Del now derives 50% of its revenues from complete x-ray systems, compared with 30% from power conversion sales into the medical market. Another 20% of the company's revenues are produced by sales of power conversion and noise suppression units into nonmedical industries. In its most recent financial quarter (end-October), Del reported revenues of $14.8 million, up 10%, and net income of $1.4 million, up 14%. Del also had a strong second quarter (end-January), but final results are not yet in, Trugman said.

Del is also changing its distribution mix. About 80% of the company's sales of complete x-ray systems are through end-user sales and 20% through OEMs. That mix is changing to 70/30 as the company targets OEM channels to capitalize on the trend among larger companies to outsource components.

In the future, Del will probably enter the market for digital radiography by adding digital detectors to its systems, Trugman said. The company will partner with a digital detector manufacturer rather than develop detectors on its own, however.

"We know that the world is in transition, and we have to stay ahead of the power curve," Trugman said. "We have some excellent R&D people at the company, and they are going to keep us ahead of the power curve by making sure that our systems are upgradable to digital, but we're not going to be a pioneer in digital."