Kodak faces tough decisions in PACS as it integrates Imation's medical unit

Kodak faces tough decisions in PACS as it integrates Imation's medical unit

Company will apply lessons learned from Vortech acquisition

While Eastman Kodak's acquisition of Imation's medical imaging business will give Kodak new distribution channels and proven product lines, the purchase also brings a number of tricky integration issues to the Rochester, NY, firm. Two segments that will be watched closely are dry laser printing and PACS, where both Imation and Kodak have operations.

Kodak and Imation announced last month that Kodak would purchase Imation's medical imaging assets for $520 million in cash. Kodak will gain several new manufacturing sites, as well as Imation's 1600 employees worldwide. Imation's medical imaging business produced revenues of $500 million last year.

Among the product lines Kodak will be acquiring are Imation's DryView line of dry-process laser printers, which have been a sweeping success in the market since shipments began in 1995. Over 4500 DryView imagers have been installed in the market worldwide. Questions now arise about what will happen to Kodak's own dry-process offering in development, 9000D, which was demonstrated as a work-in-progress at the 1997 Radiological Society of North America meeting (PNN 1/98).

But the ramifications of the acquisition may be most interesting in the PACS realm. In addition to buying Imation's traditional businesses, Kodak would receive all of the outstanding shares of Imation's Fremont, CA-based Cemax-Icon subsidiary, which may find itself with a new corporate parent for the second time in a little over a year (PNN 6/97).

Kodak has been moving swiftly towards the Windows NT operating system (PNN 6/98), while Imation's PACS employs Sun Solaris and Macintosh platforms, although there are plans to unveil NT-based offerings soon. The integration of the two disparate product lines will be closely watched by market analysts.

Kodak will be careful, however, not to repeat mistakes made in its acquisition of Vortech Data in 1993, said Sridhar Seshadri, global segment manager and vice president of Kodak's Health Imaging division. With that acquisition, Kodak bought a firm that was supposed to make the vendor a leader in PACS. Instead, Kodak experienced major difficulties in integrating its new purchase. As a result, the company's entry into the PACS market was delayed by several years.

"Over the last several years, through that integration and through taking the business from the miniPACS to the full PACS stage, we've learned a lot about what the business model for digital imaging should be," Seshadri said. "That's going to help us in combining our businesses."

With the integration of the Imation PACS lines, market watchers are curious to see what will happen to Kodak's OEM relationships. One such partner, Dutch PACS firm Applicare Medical Imaging, is not worried, however.

"Kodak will need time to sort things out, and it would only be polite to give them that," said Applicare managing director Ruud Kroon. "In the meantime, it's business as usual, and my team is confident that we can tackle any competition. The future is just a little bit more exciting."

Integration will not be achieved overnight. It will require merging of product lines and cross-training of service, sales, and training organizations for both companies, said Michael Cannavo, president of Image Management Consultants of Winter Springs, FL.

"It may initially hurt Kodak sales because of uncertainty over the products the company is offering in the near-term," he said.

In any event, the acquisition should resolve any questions remaining about Kodak's commitment to the medical imaging market. Kodak's Health Imaging unit found itself in the unfortunate position of having to fend off rumors of its own imminent divestiture at last year's RSNA meeting (PNN 1/98).

The Imation deal represents a vote of confidence by Kodak's corporate management in the medical imaging market, as well as the Health Imaging division's management team, said Martin Coyne, president of Health Imaging.

"This acquisition ought to send a clear message to all our customers about Kodak's commitment to healthcare," he said.

For Imation's part, the decision to sell the medical imaging unit was made after an analysis of the company's overall business indicated that the firm needed to focus on a smaller set of core markets, said Michael McQuade, general manager of Imation's medical imaging systems business.

"That (analysis), combined with an attractive offer from Kodak, provides Imation the opportunity to focus clearly on its data storage business and its ongoing solutions businesses," he said.

Medical imaging is a healthy component of the company, however, and Imation believed it captured the value of the business from Kodak, McQuade said. In addition, the deal will help the medical imaging business achieve maximum impact in the healthcare market, he said. The two firms declined detailed comment on specific plans as they remain in competition until the deal is closed.

In the meantime, Imation is moving forward with its product line. Prior to the Kodak transaction, Imation released DryView 8100, a dry laser imager designed for DICOM networks and direct modality connections. Suitable for lower volume printing situations and as a printing solution for Imation PACS, DryView 8100 is expected to be commercially available in the fourth quarter, according to Imation.

Imation has also released version 3.5 of its PACS line, which was displayed at the 1997 RSNA meeting (PNN 1/98). Imation PACS 3.5 includes a number of improvements in work-flow management, such as connectivity to hospital information systems and radiology information systems. Fully automated prefetching of relevant prior radiology studies and reports is now possible, according to Imation.

A number of customizable features on the company's AutoRad diagnostic workstation have been added, including enhanced hanging protocols that allow radiologists to define protocols for modality, body part and/or technique, and number and types of relevant studies, according to the firm.

Imation PACS 3.5 also includes support for Fibre Channel, a networking technology that allows departments to link AutoRad workstations in a workgroup. This allows for collaborative work flow and greater radiology staff efficiency, according to Imation. In service developments, tools for remote and on-site service have been added.

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