Vital Images slips

February 25, 2004

Executives at medical imaging software company Vital Images confirmed Feb. 11 the bad news they told investors in early January: that revenues fell in the fourth quarter of 2003. The news, released Jan. 8, caused at that time a seven-point drop in the

Executives at medical imaging software company Vital Images confirmed Feb. 11 the bad news they told investors in early January: that revenues fell in the fourth quarter of 2003. The news, released Jan. 8, caused at that time a seven-point drop in the company's $20 per share stock price. Share prices recovered slightly but then continued to slide after the February release of detailed financial information, despite company efforts to highlight a 27% rise in total revenue during 2003 to $26.8 million from $21.1 million and a 36% growth in 2003 cash flow. A dominant concern was the drop in revenues from $6.2 million in the previous year's fourth quarter to $5.2 million in 4Q 2003 and a drop in net income in 4Q quarter to $7000 from $416,000 in the year earlier period. The company attributed the sales slowdown to several factors, including sluggishness in CT scanner purchases and the growing integration of 3D post-processing capabilities with PACS.

Company strategists are trying to turn the trend toward 3D/PACS integration to their advantage. In early January, Vital Images signed a definitive agreement to acquire Hinnovation, a private Milwaukee-based provider of software solutions that allow physicians to use low-end PCs or notebook computers to access 2D, 3D, and 4D medical applications securely over the Internet. Vital Images expects to close the transaction this month. Executives at Vital Images also hope to benefit from a joint PACS distribution agreement with McKesson Information Solutions.