Merge's acquisition of Signal Streamreflects PACS market consolidation

DICOM provides fertile ground for sales growth

PACS companies are jockeying for position in the race to takeadvantage of an impending boom in purchasing interest. Interfacefirm Merge Technologies moved itself a little closer to the insiderail with the acquisition of Signal Stream Technologies (SST)in February.

The acquisition broadens Milwaukee-based Merge's product lineto include the hardware interface solutions developed by SST,according to William Mortimore, president and COO of Merge. Inacquiring SST, Merge also gains access to SST's ultrasound andnuclear medicine interface products, which complement Merge'sMRI and CT-based products.

"Most of SST's products were directed at nuclear medicineand ultrasound," Mortimore said. "They have a hardwarefocus, while ours has been software. Putting them together givesus a balanced focus."

SST marketed the Mach 1 digital interface board that adds lasercamera filming capabilities to imaging devices. The company alsodeveloped DICOM Image Server, a network gateway to transmit DICOMimages from scanners to laser imagers and archives, and DICOMPrint Server, a gateway to transmit and manage the printing ofimages on networks. Among Merge's products are MergeCOM-3, a softwaredeveloper's toolkit for implementation of DICOM networking, andMergeMVP, a digital modality interface unit.

Merge has transferred SST's products and technology from thatfirm's Novato, CA, headquarters to Milwaukee. The only SST employeeto be retained by Merge was SST founder Michael Franco, who willbecome Merge's chief technical officer.

Franco founded Merge in 1993 and the company had revenues ofabout $400,000 last year, according to Mortimore. The companyhad encountered some difficulties due to its small size, however.

"They had completed two years of operations but they werein a position where they couldn't get critical mass," Mortimoresaid. "We have the strengths to make sure Mike Franco's dreamsare carried out."

As part of the acquisition, Merge agreed to take over SST'sdebt load, which Mortimore said was "not insubstantial."

Industry implementation of the DICOM standard is creating afertile ground for PACS growth that is paying off with highersales for Merge products, Mortimore said. Including revenue fromthe SST products, Merge is on a path to register sales of $5 millionto $6 million this year, more than double the $2.5 million insales Merge posted in 1994.

Much of the consolidation that is taking place in PACS is dueto companies joining forces so they may place themselves in thebest position to take advantage of pending growth in systems sales,Mortimore said.

"There are customers who are now waking up to the factthat it is possible to (network)," he said. "Companieswho need complementary strengths are going to try to get them."