Siemen’s ultrasound strategy leverages brand recognition and customer loyalty

June 20, 2001

In many corporate mergers, acquired companies get lost in the consolidation, their operations and products integrated with those of the parent to the extent that soon little—if anything—of the old company is recognizable. Not so in the case

In many corporate mergers, acquired companies get lost in the consolidation, their operations and products integrated with those of the parent to the extent that soon little-if anything-of the old company is recognizable. Not so in the case of Siemens’ purchase of Acuson, or at least not yet. Seven months after the acquisition of the once fiercely independent pioneer of modern diagnostic ultrasound, Acuson remains a force within the imaging community.

Its products stand apart from those of its parent, Siemens Medical Solutions; its R&D remains intact at Acuson’s former headquarters in Mountain View, CA. If anything, Acuson is holding sway over its parent. Siemens Ultrasound has moved its headquarters to that of its former competitor. And even though the staff and operations are integrated, Siemens has gone to great pains to keep the Acuson name alive.

This branding goes beyond the products to the personnel. John Pavlidis, president of the Siemens Ultrasound division, is the CEO and president of Acuson, “a Siemens company.” The idea is to underscore Siemens’ commitment to maintaining Acuson products, while expanding the company’s overall geographic presence.

“We really focus on making sure that in every single region of the world, we have the right products and the right distribution channels to make our products globally successful,” Pavlidis said. “In Europe, we (Siemens) have been very strong on the Sonoline side and we want to keep that strength, just as we want to build on Acuson’s strength in the U.S. And we have very aggressive plans for growth in Asia and Latin America. So we are focusing on regional differences and customizing our approaches.”

Siemens executives appear to be doing exactly what they promised to do Sept. 27, when the deal to acquire Acuson was announced. Pavlidis and Erich R. Reinhardt, group president and CEO of Siemens Medical Solutions, stated emphatically that the acquisition would be additive. Economies of scale would be sought in administrative quarters, not on the backs of Acuson products. And, apparently, none have.

Remarkably, no Acuson products have been killed off, even though several address the same market segments as Siemens products. Acuson Sequoia and Sonoline Elegra, for example, butted heads regularly in the radiology community prior to the deal that made them commercial brethren. Now they represent different price points in the same segment. Sequoia is positioned as the super premium radiology offering, commanding up to $300,000. Elegra is the value offering in the premium segment, with prices ranging between $150,000 and $250,000.

The two products represent different technological approaches as well as different price points. Elegra engineers focused on developing innovative techniques, such as SieScape, which strings images together into a panoramic view of the arm or leg, for example. SieScape 3D, as the name implies, compiles volumetric representations of the data. Other advanced capabilities are embedded in Elegra as well, including spatial compounding, or the acquisition of data from multiple angles, which Siemens calls SieClear.

“But if the customer is really looking for the ultimate that’s possible in ultrasound and the most flexible technology when it comes to coherent image formation, then Sequoia is in a class above everything else,” Pavlidis said.

The midtier is populated by Acuson’s Aspen and Siemens’ Omnia and Sienna, with prices ranging from about $50,000 to $160,000. Siemens’ Adara brings up the rear at around $30,000.

Siemens has no echocardiography offerings, leaving the field clear for Acuson’s Sequoia, Aspen, and compact Cypress. Acuson’s AcuNav intracardiac catheter product is also still available. KinetDx, a miniPACS product created by Acuson, has remained in the ultrasound division rather than being switched to the Siemens business unit that covers medical networking and information technology.

Keeping the product lines intact may have been the best possible route for the two firms. Companies that create uncertainty in the minds of prospective buyers risk losing sales. By keeping both product lines up, Siemens removed some of the uncertainty that inevitably arises after a corporate merger.

“Fundamentally, there is tremendous strength in the Acuson brand and in the Sonoline brand, and we will continue to offer both,” Pavlidis said.

He indicated that Siemens will support the Acuson customer base indefinitely. The reason is that customers tend to buy what they know. User interface and transducer compatibility weigh heavily in decisions regarding future equipment purchases.

But the harsh reality of the business is that ultrasound scanners are notoriously expensive for vendors to keep up. In the past, Acuson boasted R&D expenditures equaling more than 10% of its annual sales. The cost of running two production lines is anything but appealing.

Not surprisingly, when companies merge, bean counters often look first at cutting R&D and maximizing production to increase volumes and lower per unit costs. Reducing costs by mixing and matching components (a corporate play to get more for less), emphasizing one product line over another, or dropping one or several products entirely also address both issues. When this merger was announced late last year, however, Acuson and Siemens executives eschewed these strategies. Siemens has, in fact, maintained R&D efforts at both its former Siemens ultrasound headquarters in Issaquah, WA, and its new digs in Mountain View, as well as at other locations around the world. Nor has the company sought to increase productivity by consolidating production lines. Going for economies of scale in production or consolidating R&D would be shortsighted, Pavlidis said.

“Cutting out some of your product offerings will suppress some of the demand for products,” he said. “Rather than merging the two product lines, it’s more likely that over time we would see a sharing of more and more capabilities, while maintaining a distinct Acuson brand look and feel and a Sonoline brand look and feel.”

No tangible evidence of cooperation between the traditionally competitive Acuson and Siemens R&D groups has yet surfaced in the product lines, but that could be coming soon. Rumors persist of a new product to be released in the months ahead. Although Pavlidis neither confirmed nor denied the reports, he noted that there would be “specific announcements within the next few months.”

Whatever comes to pass in the near term will probably provide only a hint of what the future holds. Engineers have not had enough time to unite into a single hybrid platform the most important and far-reaching technologies in the R&D pipelines of the one-time competitors. But that will come, Pavlidis said.

“Going forward, we are clearly looking at migrating some of the unique features and benefits onto each system and across the platforms,” Pavlidis said. “Obviously, the joint development of a new platform, however, is a matter not of months but of years.”

Siemens has set a clear list of goals for future development. Image quality, traditionally a priority at both Acuson and Siemens, remains on the short list of design goals. Others include the development of tools that will enhance productivity and extend the clinical bounds of ultrasound.

“Our combined entity will focus on clinically driven innovation with increased emphasis on clinical workflow and connectivity, all the way from patient registration through the final report,” Pavlidis said.