GE exploits industry confusion to expand share in ultrasound

GE Medical Systems hopes to grow its ultrasound business by double digit percentages over the next several years, capitalizing in the near term on confusion created by industry consolidation, while looking for long-term growth in clinical expansion and improved equipment. Omar Ishrak, vice president and general manager of GE global ultrasound, predicts worldwide growth for GE in excess of 20%. Ishrak and his team have been delivering that-and more.

For the past five years, the company has reported annual increases of 20% to 25% in the U.S. and 30% or better globally. The reason, according to Ishrak, is that the company has reached a critical mass in geographic coverage and product coverage, providing distribution channels in virtually every market and a range of products from low-end to high in radiology, ob/gyn, and cardiology.

GE’s growth in ultrasound has not come from the acquisition of competitors, according to Ishrak. Annual revenue has jumped from $130 million to $660 million since 1996. Only about $100 million came directly from acquisitions.

“The rest was organic or the result of acquisitions growing up,” he said. “Our strategy has not just been to buy companies and grow; it has been to create.”

GE sales will increase partly through clinical expansion. Improved performance will lead to new applications and techniques, particularly in blood-flow imaging, Doppler, and 3-D, Ishrak said.

“We expect to work on the right things and do them faster than anyone else,” Ishrak said. “We will be better than ourselves every year and if we continue to do that at a faster pace than everyone else, we will be able to maintain our edge (over competitors).”

Miniaturization offers another opportunity for GE, particularly in emerging countries. Portability is a major advantage in these regions, as well as in remote areas of developed nations, where MRI and CT are not prevalent.

“This will generate new users of ultrasound in new geographic areas,” Ishrak said. “We think Asia will have the highest growth rate.”

China is especially attractive. GE expects to sell $40 million of ultrasound equipment to China during 2001.

Most of the opportunity for growth, however, will be found in the backyards of competitors. Like a black hole, GE ultrasound hopes to increase its mass by sucking in surrounding matter.

“We only have 22% market share; almost 80% of the market is someone else’s, so we have lots of share to take,” Ishrak said. “We intend to be number one in everything in every country and every product line and every application. No order is too small for us; no product is too small for us. That is our approach to growth.”

Over the past several years, GE has consistently applied this approach to the market. In the interim, however, consolidation has radically changed the character of the industry-much to GE’s liking.

“A year ago our competition was primarily U.S.-based and comprised relatively small companies,” Ishrak said. “Today our competition is Europe-based and comprises full-line companies. Our

competition today has different cards and different constraints and we feel much more at ease with where we stand.”

Once perceived as a latecomer to ultrasound, GE now is viewed as the veteran, Ishrak said, a stable and growing company-facts that GE’s sales and marketing force will hammer home in the next 12 to 18 months, as they attack the installed bases of competitors.

“We are the stable partner and we intend to communicate and leverage that,” he said.

Prime opportunities in the near term are the customers of companies in the process of merging. The combination of Acuson and Siemens and the pending integration of Agilent with Philips ATL have raised questions in the marketplace about the longevity of their respective products. GE has a simple alternative-buy GE.

“We have no internal controversies,” Ishrak said. “We have one team and one mission.”

But GE is not focusing only on companies going through mergers. These are just the most vulnerable. All of ultrasound is a target. And GE has its finger on the trigger.