Philips to acquire leading US PACS
8 July 2005
Amsterdam, The Netherlands and Brisbane, California, USA. Royal Philips
Electronics and Stentor Inc. have announced that Philips will acquire
Stentor, a leading US supplier of picture archiving and communication
systems (PACS) used for storing, managing and distributing digital radiology
images such as CT, MRI, X-ray and ultrasound. Philips will pay approximately
US$280 million in cash for Stentor Inc. subject to receipt of regulatory
approval. Stentor's shareholders have approved the agreement and
The Merger strengthens Philips' presence in the high-growth healthcare
information technology market by enabling it to give a more complete package
of products. The geographic reach of Stentor also complements that of
Stentor expects 2005 sales to grow to approximately US$50 million and
2006 sales annual growth is projected at 50% based on the company's unique
"pay-per-study" business model, in which customers pay a fee to view,
distribute and store medical images rather than purchase a PACS system.
Stentor will be incorporated into the Healthcare IT business of Philips'
Medical Systems division.
From its headquarters location in Brisbane, California, Stentor will
become the global headquarters of Philips' overall PACS business.
"Stentor is an exceptional company with very talented people and unique
technology that will significantly strengthen our position in healthcare IT.
The merger of the Stentor Radiology PACS, the number one in multiple KLAS
ratings, and the Philips Cardiology PACS, the "Best Overall Cardiology PACS
Vendor" in the June 2005 KLAS report, gives us exactly what we want:
world-class technology already recognized and appreciated by our customers,
clear and immediate synergies with our imaging business and an opportunity
to leverage the Philips world-wide resources. Philips is strongly committed
to the support of its current customer base and will work with these users
to let them benefit from the Stentor advantages," said Jouko Karvinen,
President and CEO of Philips Medical Systems.
In commenting on the merger, Oran Muduroglu, President of Stentor, said:
"In the healthcare industry, Philips is known for its high quality medical
equipment and for its commitment to customers — an approach we value. We can
now extend Stentor PACS outside of the radiology department and into other
areas of the hospital where conditions like cancer and heart disease are
treated." Mr. Muduroglu added: "We are very excited about what this means
for all of our current and future customers, as we combine our strengths in
image and information management."
Stentor's PACS technology can transmit medical images — with full
resolution 4 to 16 times faster than any competitor, and with significantly
less hardware costs for hospitals. In addition, Stentor's proven service
delivery model and commitment to customer support is well aligned with
Philips' overall strategy of designing the solution around the customer and
making it easy for the user to experience.
Independent consultant Ralph Reyes Senior VP of KLAS noted the following:
"KLAS is an independent monitor of healthcare IT vendor performance. Unique
to KLAS is that the healthcare IT performance data we report on originates
from only one source: the healthcare provider executive who has been
personally interviewed by KLAS. Since the Stentor PACS solution captured our
healthcare providers' attention it has consistently been rated as a leading
PACS solution with #1 PACS positions in KLAS Top 20 end of year reports for
2003 (global PACS category) and 2004 (large acute care PACS category). In
addition, the 2005 Mid-Year KLAS HIT Top 20 industry report noted Stentor #1
with a rating of 90.55 out of a possible 100 points for the ranked PACS
applications. Their consistent high performance, as measured by healthcare
executives has been very impressive."
Acquisition creates leading healthcare IT provider with global reach
By merging with Stentor, Philips — the market leader in patient
monitoring systems and the second largest global manufacturer of medical
diagnostic imaging and monitoring equipment — can offer hospitals and other
customers a complete package of state-of-the-art medical scanners along with
Stentor's best-in-class PACS products to handle the large volumes of imaging
data generated by medical scanners.
In addition, Stentor and Philips have highly complementary geographic
footprints allowing for more rapid deployment of Stentor's products into
Europe and Asia, while providing Stentor's US customers with a greater
choice of medical equipment. Combined, Philips and Stentor will have PACS
installed at over 1,600 healthcare institutions worldwide, and will be
second largest in the global PACS market.
Philips and Stentor will continue to pursue their shared vision for
Both Stentor and Philips share a vision of creating a digital hospital
environment with electronic health records (EHRs) that provide physicians
with on-demand access to all patient data, anytime, anywhere. The healthcare
IT market is attractive given that U.S. and European healthcare industries
have traditionally underinvested in IT. According to an October 2003 report
by the U.S. General Accounting Office, less than 10 percent of hospitals had
replaced paper charts with EHR, and the U.S. Center for Medicare & Medicaid
estimated that in 2004 less than five percent of U.S. healthcare spending
went into IT — much lower than in financial institutions and other service
In 2003, Philips embarked on its vision for healthcare IT through the
launch of an alliance with Epic Systems Corporation — a specialist in IT
systems for creating an EHR for sharing patient information across
hospitals. By merging with Stentor, Philips will be able to equip EHRs with
diagnostic quality medical images that can be viewed throughout the hospital
and via the Internet.