Sick Patient

Siemens Sells its Hospital IT Division, as Sales Slump While Competitors Advance

Blutfluss überprüfen bei Schlaganfall-Behandlung / Monitoring Blood Flow During Stroke Treatment
Siemens has developed software that enables physicians to observe the volume of blood in the brain during treatment of stroke patients. The company is selling off its hospital software division after admitting it wasn't doing well.
  • Why it matters

    Why it matters

    Siemens is one of Germany’s largest companies, but it hasn’t done well in the hospital technology sector, despite making the division a priority.

  • Facts

    Facts

    • Siemens plans to sell its hospital information technology to Cerner, a U.S. company for $1.3 billion.
    • In 2000, the German firm bought the core of its hospital-information technology division for more than $2 billion.
    • Siemens admits sales have not kept up with the competition and it plans to focus on medical technologies.
  • Audio

    Audio

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From a strategic viewpoint, the announced sale of Siemens’ hospital-IT division to Cerner for $1.3 billion is surprising.

In Siemens’ “Vision 2020” statement, which was formulated by chief executive Joe Kaeser, digitalization played a fundamental role, and Mr. Kaeser said he intended to keep the company’s medical-technology sector.

For Siemens, the hospital-IT sale represents a failure. In 2000, the German electronics and engineering company took over the U.S. firm Shared Medical Systems, which became the core of Siemens’ hospital-information technology division. The price was more than $2 billion. In subsequent years, competitors grew and earned good money, but Siemens was getting nowhere. Today, the division’s sales are at about the same level as they were in 2000.

Siemens had invested heavily in hospital IT and made great progress, said Hermann Requardt, the head of medical technology: “At the same time we must recognize that the business success of our hospital-information systems was not always able to keep up with the competition.”

Among other things, the division markets software for patient databanks. Siemens now intends to concentrate within the medical-technology sector on laboratories, therapy and imaging physics. This includes software to evaluate images from Siemens’ computed tomography systems.

For Siemens, the hospital-IT sale represents a failure.

Part of Mr. Kaeser’s “Vision 2020” is that divisions should be sold if they could develop better with other owners. So, in effect, Siemens has given up hope of making hospital IT into a significant success.

Siemens said its former employees would fare well under the new owner. In previous sales of Siemens divisions, that hasn’t happened sometimes. For example, the mobile-phone division went bankrupt after being sold to BenQ. In the case of Osram, massive job cuts continued after the initial public offering. At the telephone-technology specialist Unify, many staffers are being released.

Siemens emphasized the “positive perspective for both customers and employees” in the pending sale of the hospital-IT division. Employees in Germany would retain their positions at current locations for three years. Most of the employees work in the United States; about 10 percent are in Germany.

Neal Patterson, Cerner’s chief executive, said the Siemens division’s extensive customer base and research abilities would be great gains for his company.  The U.S. firm, which specializes in healthcare IT, can expect sales revenues of about $4.5 billion. If regulators approve the sale, the takeover should be completed in 2015’s first quarter. Cerner intends to pay the $ 1.3 billion price tag in cash.

Siemens and Cerner also have agreed to collaborate in other areas. Cerner said the goal is a systematic connection between medical technology and healthcare IT. The two companies intend to invest up to $50 million each in the effort.

Mr. Kaeser had recently announced that Siemens’ medical-technology arm will become an independent unit. Observers expect it will go public eventually. But this doesn’t necessarily mean a separation. Siemens could retain majority control.

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