HIStalk Poll: Cerner is Getting a Good Deal with Siemens Acquisition … But Buyer Beware

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HIStalk readers say Cerner is making the right move, just needs to avoid distraction

Cerner Corporation’s planned acquisition (Wall Street Journal, August 5, 2014, http://online.wsj.com/articles/cerner-corp-to-acquire-siemens-health-information-technology-unit-1407271734) of Siemens AG’s Health Services division for $1.3 billion is a good deal for Cerner, according to a majority of healthcare information technology experts polled in late August by the industry blog, HIStalk. But the online survey’s respondents were cautious about the long-term effects of the huge merger, with many noting that Cerner faces an uphill battle in integrating the two companies’ technologies and satisfying their expected customer base of 18,000 healthcare facilities worldwide.

Most of the poll’s 400 respondents – 62 percent – feel Cerner is making the right move in acquiring Siemens’ health IT division, which has suffered from declining sales in recent years. Individual observations and opinions from some of the experts who responded to the poll lent additional context to this result:

  • The purchase price is about one year’s revenue for Siemens Health Solutions, giving Cerner the chance to increase margins by eliminating corporate duplication. The resulting profits could pay for the acquisition in as little as four years.
  • Cerner will likely encourage the significant Siemens customer base to move to Cerner’s product line over time with minimal sales and marketing expense, giving it a competitive advantage over privately held Epic Systems.
  • Cerner will gain revenue cycle expertise, a notably weak spot in its product line.
  • Siemens bought Shared Medical Systems for $2 billion in 2000 and will sell the business to Cerner for just over half that amount.

Negative observations shared by the respondents included:

  • Big healthcare IT vendor acquisitions have rarely been successful for either the acquiring company or the acquired vendor’s customer base.
  • Cerner has little experience integrating acquisitions.
  • Cerner will fail if it tries to maintain the Siemens legacy systems indefinitely.

“Poll respondents and HIStalk readers generally agree that Cerner is getting a valuable asset for a fire-sale price,” said site owner and self-proclaimed cynical blogger Mr. HIStalk. “Cerner will gain an edge over Epic in selling its products to a somewhat neglected customer base and will become the largest vendor in the industry in terms of revenue. Even Wall Street likes the deal. Cerner just needs to avoid letting the acquisition distract it from its well-managed and profitable business.”

About HIStalk

HIStalk, launched in 2003 by an anonymous health system IT director, is one of healthcare IT’s most influential, most referenced, and most heavily trafficked sites. Its industry news, rumors, and humor are followed by 50,000 provider and vendor executives, informatics professionals, government officials, and financial executives, 92 percent of whom who say reading HIStalk helps them do their job better.

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