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SpaceLabs Finds an Exit in Instrumentarium

Executive Summary

Just as it did when it bought Datex-Ohmeda, the anesthesia equipment company, Instrumentarium has scooped up a US firm that built a US presence in an important technology area. This time the play is for SpaceLabs in critical care monitoring. For SpaceLabs, the acquisition ends a difficult time as it tried to remain independent in the face of a declining share price and heightened competition from some of capital equipment's largest players.

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At Least for Some, an Independence Day Celebration at Marconi

By acquiring Marconi Medical Systems in a $1.1 billion deal announced in July, Philips NV tacks on volume and adds scale to its medical systems business. Strategically, however, the move is part of a continuing response to competitor GE Medical Systems' ongoing acquisition efforts, which have challenged its competitors in medical capital equipment to get bigger to keep up.

In Hospital Equipment It's Goodbye Agilent, Hello Philips-Andover

With its $1.7 billion acquisition of the Healthcare Solutions Group (HSG) of Agilent Technologies, the fourth major purchase for the company in less than two-and-a-half years, Philips Medical Systems believes it now has the muscle to compete long term with its principle competitors in the global hospital equipment market: GE Medical Systems and Siemens Medical Systems. As patient monitoring and clinical systems have become more integrated, drawing information in multiple formats from many hospital departments and remote locations, hospitals increasingly want to work with a single supplier, driving consolidation. Being the winner, or highly competitive, on a product-to-product basis, as Philips has been in its markets, is no longer enough. Thus, to maintain a level playing field with GE and Siemens, which have each been bulking up via acquisition this year--notably Siemens with Acuson and Shared Medical Systems, and GE with Critikon, plus many smaller purchases--Philips has also been expanding the size, breadth, and depth of its offerings. For Agilent, the deal puts to rest a half-year's worth of speculation about what it would do with HSG, which had experienced declining orders and revenues in the last two quarters, leading to an August 2000 restructuring.

Applying the GE Mantra to Medical Systems

To keep pace with market changes and the slow growth in many of its core businesses, GE Medical Systems (GEMS) has been expanding its role as a maker of diagnostic modalities and monitoring equipment to include clinical systems and productivity solutions for its customers. In keeping with GE's overall business philosophy, emphasizing information technology, GEMS is using the Internet to improve productivity for itself and its customers. By establishing itself as the best-in-class provider of products and services, GEMS expects to take market share from its competitors. But as GEMS moves into new hospital departments and up the hospital hierarchy to the CIO and CEO, it must not lose touch with what got it where it is--selling radiology, and more recently, cardiology, systems. The extent that GEMS can effectively grow its business using that model is unclear. Such systems and services may be limited to being an adjunct to the core business of selling imaging equipment, not the cornerstone for growth of a billion-dollar, information-propelled business.

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