Kodak grows digital business with purchase of Lumisys

November 22, 2000

By Robert BruceJust a month ago, Dr. Phillip Berman, former Lumisys CEO and current CEO of AuntMinnie.com, announced that the AuntMinnie Web portal was up for sale. A move away from its parent into "a commerce or ASP environment" would be the optimal

By Robert Bruce

Just a month ago, Dr. Phillip Berman, former Lumisys CEO and current CEO of AuntMinnie.com, announced that the AuntMinnie Web portal was up for sale. A move away from its parent into "a commerce or ASP environment" would be the optimal scenario, Berman said at the time.

Instead, Eastman Kodak will acquire both parent and child.

Kodak has entered into an agreement to purchase Lumisys, a provider of desktop computed radiography systems and x-ray film digitizers, for approximately $39 million in cash, the companies announced Nov. 9. As part of the deal, Kodak will also acquire AuntMinnie.com.

Lumisys will become a subsidiary of Kodak, the companies said. AuntMinnie.com, an Internet radiology portal, will remain a subsidiary of Lumisys.

Unless the purchase receives regulatory and Lumisys stockholder approval quickly, the planned AuntMinnie.com Webcast scheduled for this month's RSNA meeting could be awkward, as Kodak rival Agfa is sponsoring the Webcast.

"We're not going to interfere with any of their business until the acquisition is completed," said J. Michael McQuade, Kodak's senior vice president for Health Imaging. McQuade was asked if AuntMinnie.com would sever its relationship with Agfa, and whether Kodak would step in to sponsor the Webcast.

"It is probably premature to give you an answer," he said. "The timing has something to do with it."

McQuade said he expects the acquisition to close by the end of the year.

Under terms of the agreement, Kodak will acquire all the capital stock of Lumisys for $4.05 per share. Shares were at $2.56 on the Nasdaq the day before the announcement and closed at $3.88 the day after.

The high this year was $5.25 in March, while the historical peak was $30 in 1996. Shares listed at $3.84 on Nov. 13.

"We got the digitizer business, which fits in very well with our digital transition, and we'll get the desktop CR, which fits in very well with our computed radiography platforms," McQuade said. "This acquisition is evidence of our commitment to be a leader in the digital transformation of medical imaging."

The acquisition will give Kodak access to the Lumisys desktop ACR-2000 system, filling out a CR product line that now includes the Kodak DirectView CR 800 system, designed for distributed image processing, and the Kodak DirectView CR 900 system for centralized image processing.

Lumisys' film digitizers are not promising long-term core products, due to the growing popularity of digital x-ray detectors.

Kodak has also begun marketing digital radiography products, which are the result of collaborations the company worked out a year ago with other vendors Analogic, Hologic, and Fischer Imaging (SCAN, 10/25/00).

These systems have amorphous selenium detectors developed by Hologic's Direct Radiography Corp. (DRC) subsidiary.

"We have made a very strong and public commitment to amorphous selenium technology," McQuade said. "We're committed with Analogic to the amorphous selenium technology that they developed."

The Kodak transaction will give Lumisys the resources it needs to take advantage of its technology, said Dr. Bala Manian, Lumisys chairman and acting CEO.

"Lumisys has made great strides in developing novel, value-driven imaging technology; however, the company has now reached the stage where the resources of a large firm with broad distribution are pivotal to its products' success," Manian said. "Customers will benefit from the continued investment in technology that Kodak can make, as well as from the world-class service and support for which Kodak is renowned."

In another move that may be related to the acquisition of Lumisys, Kodak signed an agreement with online service portal Novation, which acts as a buying agent for some 5000 hospitals and healthcare facilities (see related story).

Berman, the radiologist who founded AuntMinnie.com, will remain in his post as CEO of the Web portal. Berman is a member of the Lumisys board of directors.

"Our intention is to look at the value that AuntMinnie has right now and, hopefully, find better ways to keep that going forward," McQuade said. "Phil's a big part of that."