It’s Philips and Marconi—again?

July 8, 2001

In 1988, the RSNA exhibit floor was abuzz with talk of the proposed merger of Philips Medical Systems and Picker International. Executives from the two companies had declared it a union of equals, two great companies forming a multinational powerhouse.

In 1988, the RSNA exhibit floor was abuzz with talk of the proposed merger of Philips Medical Systems and Picker International. Executives from the two companies had declared it a union of equals, two great companies forming a multinational powerhouse. Some claimed to know what it was, but no one knew what it would be called. Lapel buttons declared “It’s Philips and Picker.” In the end it was simply called off. Volatile currency markets were blamed, but there may have been other problems.

Thirteen years later, the deal is back on. In the interim, the companies have changed remarkably. Philips, through its acquisition of ATL, ADAC Labs, and its pending deal with Agilent Technologies (which should close by early fall), has expanded. Picker, now Marconi Medical Systems, has consolidated. The two are no longer equals-and that can only help.

As the acquirer, Philips will call the shots, and there will be plenty of shots to call. In MR, both companies have or are developing competing products for the 3-tesla, high-field, and open segments. In nuclear medicine, Philips-thanks to ADAC-has one of the most popular nuclear medicine lines in the business. There is more latitude in CT, where Philips has yet to field a multislice CT scanner. Marconi’s Mx8000 products will give Philips an immediate presence in this market segment, providing Philips the chance to develop an area detector that leapfrogs current multislice technologies.

But product lines and R&D will be the least of Philips’ headaches. Enormous regulatory hurdles must be scaled, not only in the U.S. but in Europe, which only weeks ago shot down the GE-Honeywell deal. Then there is the process of digesting Marconi while still in the process of gobbling Agilent and after only recently devouring ADAC. Complicating matters will be Marconi’s recent spate of deals with smaller OEMs. CTI PET Systems has agreed to supply PET scanners to Marconi, but ADAC has its own line of positron imagers. Swissray is excited about Marconi Health Care Products (HCP) marketing its digital radiography systems. But Philips has an extensive line of x-ray systems, including digital products.

In the meantime, the two companies will have to contend with the exodus of personnel that inevitably accompanies such deals. Years passed before Picker and Philips fully recovered from their failed merger attempt in 1988, and a major reason was the loss of personnel.

This may be the greatest challenge of all-avoiding a repetition of history.