Picklips Rides Again!
The announcement that Royal Philips Electronics was buying Marconi Medical Systems was déjà vu all over again. Back in 1987 there was a ballyhooed attempt to connect the two companies, Picker International (as Marconi Medical was known back then) and Philips. They even had a combined booth at the RSNA meeting. But what would be the new companys name? In Chicago that year, most called it Picklips!
Here was the deal: Philips Medical was the worlds No. 3 medical device manufacturer in 1987, with $1.3 billion in annual sales, predominantly in Europe. Picker was No. 4 with $685.4 million in annual sales, mainly in the U.S, and it was owned by General Electric Co. plc, of London, better known as GEC.
A combined Picklips was expected to rake in $1.9 billion a year and ease out Siemens for the No. 2 spot. Big American GE, not affiliated with GEC, was the No. 1 medical device seller at the time.
The proposal was a 50/50 joint venture, with GEC kicking in $150 million cash to make up for Pickers lower annual revenue. An advertising campaign commenced, extolling the virtues of the combined company. People were reassigned in anticipation. In fact, Dominick Protomastro, president of U.S. Philips Medical Systems, departed, leaving Philips without anyone to run operations in the New World.
Picklips made sense. Forty percent of Philips medical manufacturing was located in the U.S. Picker would help reduce the time Philips top executives spent thinking about medical systems, cut research costs and allow the company to gain a better foothold in the U.S. market. Picker needed improved international distribution and the extra momentum a huge multinational conglomerate provided.
There were cultural differences. During the late 1980s, Philips relied on a strong network of independent dealers to sell and support its systems. Pickers relationship with service organizations was incredibly horrible. Arrogant behavior by some of its local service managers for example, telling hospitals that non-Picker tubes and independent service schools were a threat to patient safety, and the notorious locked cabinets installed inside customers facilities lead to unflattering investigations by the Department of Veterans Affairs and the Department of Defense.
The Picklips deals complexity was its undoing. International monetary fluctuations in early 1988 made the Netherlands guilder look a bit pale, so GEC decided its $150 million cash payment should be eliminated, or at least reduced. The Dutch didnt think the new split was such a treat, and the merger of equals was called off in March 1988.
Second Source magazine poked fun at the Picklips collapse with its April/May 1988 cover. (See left.) A shocked Philips bride discovers the Picker side of the wedding chapel is filled with frogs. The illustrations a bit overwrought, Picker had pretty good technology, but it certainly got the point across.
After Picklips, conventional wisdom proclaimed a No. 4 player couldnt survive and GEC said it was looking for another mate. Guessing which company would buy Picker became the annual RSNA parlor game. Picker then Marconi Medical Systems found itself sidetracked answering rumors instead of developing and promoting new technology. Sad to say, the company still has a few local service managers who resort to disinformation and locked boxes instead of selling customer service and superior quality.
Philips U.S. fortunes improved as cardiac catheterization labs and MRI became increasingly important. Almost 13 years later, Philips Medical found itself strong enough to go on a buying spree. Instead of a complicated merger, it is buying Marconi Medical Systems outright, just as it has purchased Agilents Healthcare Solutions Group, ATL, ADAC and others.
And Second Source? Well, that shocking frog wedding cover made people notice the fledgling magazine for the independent medical equipment service industry. After a few name changes, we are now 24×7, the leading business publication for healthcare technology management, service and support.