GE moves into ultrasound’s top tier with acquisition of Diasonics Vingmed

Questions remain about how Diasonics will be integrated

It's a horse race at the top of the ultrasound market. GE Medical Systems finalized its acquisition of Diasonics Vingmed Ultrasound this month, giving GE a legitimate shot at claiming the mantle as the largest ultrasound vendor in the world.

GE paid Elbit Medical Imaging of Haifa, Israel, $228 million for Diasonics Vingmed in an agreement that was completed on April 9. The acquisition gives GE a strong position in the echocardiography segment, a market in which GE did not participate prior to the deal (SCAN 3/4/98). Although the acquisition is now official, many questions remain about how Milwaukee-based GE will integrate the Santa Clara, CA, company's operations with its own.

The roots of the acquisition lie in GE's aspiration to be a major player in ultrasound. GE's ultrasound business has been growing at a 30% annual rate over the last three years, but the company believed it needed to participate in the cardiac market to achieve its goal to be the largest ultrasound vendor in the world, according to Omar Ishrak, general manager of global ultrasound.

GE could have built a position in cardiology from the ground up, in the same way that it built its general imaging business through the introduction of the internally developed Logiq line of ultrasound scanners. Instead, GE looked to acquisition, which GE believed would bring it the echo position it desired without distracting the vendor from its rapidly growing radiology business, according to Ishrak.

"The skill set required to manufacture, to market, and to sell (to the cardiology market) is quite different," he said. "It requires a dedicated and focused group, and we did not want to distract ourselves from general imaging, with which we are on a strong and consistent trajectory. This (acquisition) gives us a dedicated focus in cardiology, with a group of experts who are already familiar with the applications, have relations with customers, and have a dedicated product."

Diasonics Vingmed's dedicated product is System Five, a well-regarded echo scanner introduced in the U.S. last year (SCAN 3/13/97). The scanner's digital architecture and high-frame-rate capabilities have won the system favorable reviews from echocardiographers. One of GE's near-term goals is to put more resources behind the marketing effort for the system, giving it a higher public profile than it has enjoyed so far, according to Ishrak.

System Five was not the only attraction that drew GE to Diasonics Vingmed, however. GE's growth rates have created high demand for service personnel. For example, the company sold over 2500 color Logiq systems last year, all of which require maintenance, Ishrak said. Diasonics Vingmed has dedicated ultrasound service personnel that GE can add to its service infrastructure, thus improving the company's capability.

A third reason for the acquisition is that Diasonics Vingmed can bring GE additional distribution capability in GE's core general imaging market. Although GE has global distribution reach, there are some areas of the world-and even the U.S.-where the company could use additional expertise in ultrasound. Diasonics Vingmed is particularly strong in Australia, Brazil, and France, and in the German echo market.

"We still feel that there are countries around the world where we do not get our fair share," Ishrak said. "We have a GE presence there. We just don't have the ultrasound franchise there."

The Diasonics Vingmed acquisition raises the question of who holds the top spot in the ultrasound market. Adding Diasonics Vingmed's 1997 revenues to those of GE's ultrasound unit would have given GE sales of around $450 million last year, according to analyst estimates. Elbit in March reported that sales in its Elbit Ultrasound unit, which essentially is composed of Diasonics Vingmed, were $182.4 million in 1997 (SCAN 3/18/98).

GE's $450 million sales figure certainly exceeds revenues recorded by Acuson and ATL Ultrasound in 1997. Acuson of Mountain View, CA, posted revenues of $437.8 million in 1997, while ATL reported annual sales of $431.2 million. The wildcard in this equation is Toshiba, which historically has eclipsed both Acuson and ATL on the strength of its global ultrasound sales. Financial figures provided by Toshiba cast doubt on GE's claim of being the number one ultrasound vendor based on revenues from sales and service, at least for 1997.

"Toshiba as a worldwide ultrasound provider exceeded $480 million in revenue last year," said Michael McLean, vice president of the vendor's ultrasound business.

Even if GE isn't the largest ultrasound vendor today, however, it may not take long to get there, according to Ishrak.

"In our mind, this puts us in the number one position," he said. "You can argue about 5% here and there, but basically we are right there at the top."

In other GE ultrasound news, the company announced at last month's American Institute of Ultrasound in Medicine meeting in Boston that it has migrated the Maximum Resolution upgrade to Logiq 500 platform. Maximum Resolution was first unveiled last year on the super-premium Logiq 700 system (SCAN 5/14/97). The upgrade includes enhancements to both gray-scale and color-flow imaging, as well as integrated 3-D imaging and better image archiving capability.