Polaroid's search for Helios partner finds match in Sterling Diagnostic

November 6, 1996

Sterling to buy assets of Helios dry-laser programPolaroid Corp. has not been reticent about publicizing its intentionto find a corporate partner for its Helios dry-process laser printingtechnology. The Cambridge, MA, company may have surprised

Sterling to buy assets of Helios dry-laser program

Polaroid Corp. has not been reticent about publicizing its intentionto find a corporate partner for its Helios dry-process laser printingtechnology. The Cambridge, MA, company may have surprised someindustry observers, however, when it revealed just how far itwas willing to go. Polaroid last week announced that it has reachedan agreement to sell manufacturing and marketing rights for Heliosto film and digital imaging developer Sterling Diagnostic Imaging.

In a news conference Oct. 30, Sterling chairman, CEO, and presidentRodney Wolford and Polaroid Medical Imaging Systems presidentGerald Knudson announced details of the plan that rang down thecurtain on Polaroid's long effort to market Helios. Sterling willacquire Helios assets, including inventory and printer manufacturingcapability, which will be moved to Sterling's facility in Glasgow,DE. Polaroid will continue to manufacture Helios film.

PMIS will evolve into an R&D unit with a mission to developtechnology rather than market products. About 30 to 50 PMIS employeesout of a total of 150 will be offered jobs at Sterling, accordingto Sterling vice president and COO Ernest Waaser. Others willbe reassigned within Polaroid, while some may lose their jobs.

As part of the agreement, Polaroid will make an equity investmentof up to 15% in Sterling's parent holding company. Polaroid willalso take a special charge of between $15 million and $20 millionin the fourth quarter of 1996 to cover costs associated with thedeal. Sterling will have rights to new technologies developedby Polaroid for the medical imaging market. The deal is expectedto close by the end of November, with Sterling Helios sales followingnot long thereafter.

"There obviously will be some transitions, some trainingtime, for our sales and technical people to complement those weare bringing over from Polaroid, but I anticipate that by thefirst of January we will be in full tilt in terms of having ourmarketing channels filled with the ability to market Helios,"Wolford said.

The agreement is the final act in a drama begun late last yearby Gary DiCamillo, who was hired as Polaroid's chief executivewith the mission of reviving a company having difficulty breakingout of its fading instant-photography business. After coming onboard, DiCamillo initiated a review of Polaroid business unitsthat resulted in a restructuring at PMIS (SCAN 12/27/95). Earlierthis year, Polaroid admitted that it was looking for corporatepartners to help it sell and/or manufacture Helios (SCAN 4/24/96).

Polaroid's problems with Helios began with the product's longintroduction process. When Helios was introduced in 1989, Polaroidwas targeting a release date of 1990 (see story, this page). Later,that was pushed back to 1991. Ultimately, Helios 810, the 8 x10 version for nuclear medicine and ultrasound applications, didn'tget to market until 1993, and Helios 1417, a 14 x 17 printer forthe most commonly used imaging modalities, didn't begin shippinguntil late 1995.

By then, Helios faced stiff competition in the dry laser segmentfrom film and printer manufacturer 3M (now Imation), which introducedits DryView line at the 1994 Radiological Society of North Americameeting (SCAN 12/14/94). Unlike Polaroid, 3M did not have to buildnew distribution channels, and the company has been able to leverageDryView sales off its installed base of wet lasers. DryView alsohas a sizable throughput advantage: 120 14 x 17 prints an hour,versus 30 for Helios 1417. Polaroid's Knudson estimated last weekthat Helios has a 10% market share in the total laser market anda 40% share of the dry laser market.

Sterling, on the other hand, will enjoy a number of advantagesthat Polaroid didn't. Sterling has existing distribution channelsin the medical market, and will be able to aggressively marketHelios to both end users and OEMs, whereas Polaroid relied primarilyon OEMs.

In addition, Sterling will be able to offer Helios as partof a stable of technologies that range from digital image managementto its Direct Radiography x-ray digitization program. Sterlinghas hopes that the high resolution of Helios will complement theimprovements in image quality Sterling plans to achieve throughDR, according to Wolford.

Sterling also has plans to develop a full range of dry-printingdevices, from lasers like Helios to non-lasers. Sterling is developinga non-laser dry-process printer in cooperation with another companyin a relationship that will be announced this week. That productwill occupy the low end of Sterling's dry-process offerings, withHelios at the premium end.

As a mid-range product, Sterling plans to release a new dry-processlaser printer based on Helios technology that will be pitted directlyagainst Imation's DryView. That product should be ready for commercializationsome time in 1997.

Sterling also plans to take on the throughput issue that mayhave restricted Helios sales.

"There are things we are doing right now in the laboratoriesthat will improve the performance, the pricing, and other thingson Helios that will allow us to move it into even greater andmore significant markets," Wolford said.