Siemens folds Quantum, Gammasonics into unified U.S. structure under SMS

Siemens initiated a restructuring of its U.S. medical operationslast week that will eventually centralize all corporate unitsunder Siemens Medical Systems in Iselin, NJ. The German vendorpreviously had U.S.-based medical businesses with worldwide productresponsibilities reporting directly to Erlangen headquarters.In those cases, SMS functioned as one of many national organizationsproviding U.S. support for the particular product line.

When the changes are complete, SMS will have five businessgroups reporting to president and CEO Robert J. MacKinnon. Theseare:

• ultrasound;

• Siemens Gammasonics (nuclear medicine and PACS);

• all remaining diagnostic imaging modalities;

• electromedical (patient monitoring); and

• Siemens Medical Laboratories (linear accelerators).

Additionally, Siemens Hearing Instruments, Siemens InfusionSystems, Siemens Pacesetter, Pelton & Crane, and Burdickwill operate as operating subsidiaries of SMS.

The first phase of the restructuring, effective with the announcement,brings the ultrasound and electromedical groups under SMS. BySeptember, Gammasonics and SML will be folded into the structure.

The move follows Siemens' decision last year to consolidateworldwide ultrasound operations at the Issaquah, WA, headquartersof Siemens Quantum (SCAN 6/3/92). Quantum Medical Systems wasan independent ultrasound vendor acquired by Siemens three yearsago (SCAN 4/11/90).

It is not clear yet what operational changes the SMS restructuringwill have for Siemens Quantum. The ultrasound group will retainworldwide responsibility for the modality as well as its factoryand sales and service staffs. Siemens Quantum currently operatesout of two facilities in Issaquah, but will move to a larger singlesite this year.

"The consolidation of the new Ultrasound Group with otherresources in Siemens will provide synergies and better utilizationof those resources," Lothar Koob, Siemens group vice presidentfor ultrasound, said in a prepared statement. Koob was formerlypresident of Siemens Quantum.

Koob, along with a number of other German ultrasound executives,moved to the U.S. from Germany last year during the consolidationof ultrasound operations. He characterized the new move as a continuationof that consolidation process.

Parent Siemens AG in Munich is committed to making a long-terminvestment in ultrasound, said David Croniser, vice presidentof marketing. While Siemens has been cutting medical staff worldwidein response to medical market sluggishness, resources have pouredinto Siemens Quantum.

Siemens developed a separate sales force last year to targetob/gyn and urology applications of the ultrasound systems initiallydeveloped by Siemens prior to the Quantum acquisition.

The Quantum 2000 scanner remains Siemens' premium radiologyscanner. Germany has provided the ultrasound effort with the resourcesand management flexibility to continue upgrading the 2000, whiledeveloping its next generation technology.

"We have laid out a five-to-seven-year (ultrasound) plan,"Croniser told SCAN. "We have been realistic. They (Erlangenheadquarters) know up front what is necessary to invest in orderto make this business successful," Croniser said.

As Siemens has tried to replicate the fleetness of foot ofindependent ultrasound vendors, it has allowed Siemens Quantumover the last year to initiate development, operational and staffingaction on verbal approval from Germany, followed up later witha formal written plan, he said.

Product parity in the high-end radiology ultrasound segmenthas increased competition and price discounting considerably.Prices are eroding in all segments of the ultrasound market, Cronisersaid. Over the long run, however, the modality has growth potentialas the technology improves and reimbursement and environmentalissues in other modalities drive procedures into ultrasound.

Siemens' presence in international ultrasound markets was significantbefore the Quantum acquisition provided a leg up into the U.S.radiology segment. The vendor has 23-25% of the German ultrasoundmarket and a 6-8% worldwide ultrasound market share, he said.

Developments restricting private physician practice in Germany,effective September, could dampen the market there. Until theGerman changes go into effect, however, there has been a bubbleof orders as a significant percentage of doctors in public hospitalsswitch to private practice, he said.