DpiX gets new lease on life with purchase by consortium

June 1, 1999

DpiX gets new lease on life with purchase by consortiumTrixell, Varian, and Planer take controlling interestAnother supply crisis for thin-film transistor (TFT) arrays used in flat-panel digital radiography systems has been averted. A

DpiX gets new lease on life with purchase by consortium

Trixell, Varian, and Planer take controlling interest

Another supply crisis for thin-film transistor (TFT) arrays used in flat-panel digital radiography systems has been averted. A consortium of dpiX's customers have joined forces to acquire an 80.1% interest in the Palo Alto, CA-based firm from its parent Xerox. Xerox will retain a 19.9% position in dpiX, which develops amorphous silicon arrays that can be used in either digital x-ray detectors or active-matrix liquid crystal displays (AMLCDs) for image viewing applications.

As expected, defense firm Planar Systems and medical imaging companies Trixell and Varian Medical Systems are participating in the consortium (PNN 5/99). All three companies use dpiX's TFT arrays in their products.

The current TFT supply crisis began last month when Xerox announced that it would divest the firm or shut it down if a buyer could not be found. If dpiX had gone under, it would have been the second U.S. TFT array supplier to go out of business in a year. Sterling Diagnostic Imaging's previous TFT supplier, Optical Imaging Systems, shut down in late 1998 (PNN 10/98), and uncertainty over the supply of TFT arrays has led to concern about the commercialization of digital x-ray systems.

The consortium members declined to comment on future plans until the deal closes, probably in early June. Meetings between dpiX executives and consortium members will take place the week of June 7 to determine future strategies for the new dpiX, said dpiX president Timothy Da Silva.

Da Silva, who will retain that position in the new company, joined dpiX on March 5, and was previously vice president of operations for Xerox's New Enterprise companies. Trixell president Gerard Daguise has been named chairman of dpiX's board of directors. Daguise is also vice president of the radiology business unit of Thomson Tubes Electroniques.

DpiX's manufacturing plant in Palo Alto will be maintained, and there will be no disruption in the supply of TFT arrays, Da Silva said. A new holding company, PhSiTh LLC, has been created by Trixell's member companies (Philips Medical Systems, Siemens Medical Engineering, and Thomson-CSF) to represent their interests in the takeover of dpiX. Each of the Trixell companies owns one-third of PhSiTh.

Further financial details of the transaction, such as the percentage of dpiX that each consortium member owns and the overall purchase price, were not released.

Trixell decided to participate in the consortium to reinforce its supply of TFT arrays, said Jean Chabbal, general manager for Moirans, France-based Trixell. Trixell also maintains an alternative source for TFT arrays, which it declined to identify. The company will continue this dual-source supply strategy for the foreseeable future, according to Chabbal.

Another consortium participant, Planar Systems, has had a long-term supply relationship with dpiX, and although it has another supply source from an Asian company, it elected to participate to solidify its TFT supply, said Jack Raiton, CFO. The Beaverton, OR-based company employs dpiX's TFT arrays in its commercial and military avionics displays.

The acquisition will mark a new beginning for a company that has shown much promise but has yet to achieve profitability. Xerox's technology R&D lab, Xerox PARC, spun off dpiX in March 1996 to commercialize TFT array technology that could be used for digitizing x-ray studies and for viewing images. A source knowledgeable about the situation said that dpiX had revenues in 1997 and 1998 of $8.5 million and $11 million, respectively. Xerox invested more than $50 million in the venture, but the firm has never been profitable, according to the source.

Xerox's decision to divest dpiX, coupled with the demise of Sterling's TFT supplier OIS, highlights the difficulties that many companies are having in making a profit in the flat-panel digital radiography segment. While most analysts believe these systems will ultimately have a huge impact on the market, implementations to date have been minimal, due largely to the early stage of the technology and the high cost of the systems compared with computed radiography and traditional analog systems.

And the uncertain supply of TFT arrays for flat-panel digital x-ray systems has been a cloud hanging over the market. Participants in the consortium hope that the acquisition will resolve some of these doubts.

"It's true that the digital x-ray market is starting slowly, but we expect that our partnership with dpiX will help speed up this market, because now is the right time," Chabbal said. "The market is certainly more informed about the new technology and is waiting for the products."