Sunday, October 02, 2005

Another healthcare IT provider gobbled

GE announced an all-cash takeover of IDX Systems (IDXC) at an attractive premium. Healthcare remains among the most under-penetrated IT market, with most not even realizing the cost-savings possible with something as simple as a website for public announcements.

This sector will remain attractive for larger players. Other targets include, as I have mentioned repeatedly in past posts, Eclipsys (ECLP), Mediware (MEDW), Neoforma (NEOF), Cerner (CERN) and Quality Systems (QSII).

I own shares of Eclipsys, bought during the last earnings miss and other accompanying bad news, and will be holding till the eventual buyout. Mediware and Neoforma look attractive, but I have not done enough research on them yet.

Cerner and Quality Systems, while sound companies, look extremely expensive. They both remain targets, but I will need a substantial discount to current prices to buy them. I did own Cerner, bought mostly at $16 after their previous disastrous warning, and sold too soon, at around $25 - the stock today stands at $87! I had a substantial, atleast by my standards, number too.

I expect IBM, Oracle and even Microsoft to look for more targets in this sector.

Turning the spotlight on the acquirer, GE now looks like a great value buy. A number of fund managers and other "experts" have been saying so for a couple of years now, without making any difference to the stock price. But the fact that this deal was an all-cash one tells me that the stock is worth buying now.

I am not a fan of conglomerates, especially industrial/machinery ones, but will make an exception for GE. They seem to have pulled it off!


At 5:44 PM, Anonymous Blue Cross of California said...

Interesting to see healthcare and IT work together hopefully it can improve our health care system.


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