Slump in ultrasound purchasing forces more industry cutbacks

A market slump is choking the ultrasound imaging segment. Uncertaintyover health-care reform has flattened scanner sales. Vendors,determined to maintain R&D expenditures in a technologicallycompetitive industry, are reducing their work forces and restructuringoperations to cut costs until demand picks up again.

Last month it was ATL's turn to slash expenses in a restructuringeffort that saw 240 employees lose their jobs. The figure is almostidentical to the number of workers let go by competitor Acusonin a similar move three months ago (SCAN 6/16/93).

ATL incurred a one-time charge of $4.3 million in connectionwith the restructuring. The job cuts made up about 11% of ATL'sworldwide work force. The Bothell, WA, company expects to posta loss for the third quarter (end-October), after reporting anet loss for the second quarter (end-July) of $1.8 million.

Other ultrasound scanner vendors have also posted losses inrecent months. Acuson reported a loss of $6.7 million for itssecond quarter (end-July), a figure that included a $12 millionrestructuring charge (SCAN 8/11/93). Diasonics Ultrasound posteda second-quarter loss of $3.1 million (end-June).

ATL's cuts were made despite the fact that the company hasbeen operating more efficiently over the past year. ATL grew 15%last year but did not add a corresponding number of new employees,according to president David M. Perozek.

"We were using our growth to improve our operating efficiencyby keeping our head count under control," Perozek said. "Thatwas an evolutionary way to streamline by taking advantages ofchanges as we grew. This year the growth has been dampened bymarket conditions in the U.S., primarily, and we felt we had tostreamline faster."

The layoffs were made across the board. ATL put a priorityon preserving the integrity of its R&D force, but some reductionswere made in that department nevertheless, Perozek said.

One area that was not cut was ATL's marketing efforts in Asiaand Latin America, where equipment purchasing continues to growapace, according to Perozek.

Part of the problem ultrasound companies are experiencing isdue to the fact that buyer uncertainty has weakened a market thathad begun to slacken even before Clinton's election, accordingto Larry Haimovitch of Haimovitch Medical Technology Consultantsin San Francisco.

"To some extent the ultrasound market began to slow earlier(than the general medical imaging market)," Haimovitch said."The growth in the late 1980s was driven by high end, suchas color Doppler. The market was mature."

The industry's woes are not likely to be lifted any time soon.While the Clinton health-care reform plan is scheduled to be unveiledlater this month, political wrangling over the plan will assuredlycontinue well into next year. Companies like ATL are settlingin for the long haul.

"The uncertainty that's creating our customers' situationright now is not going to be lifted overnight," Perozek said."There probably won't be federal legislative clarity until1995, and you have to expect that things aren't going to bounceback overnight."

In any event, ultrasound companies continue to make a casefor their modality as one that is uniquely suited for managedcompetition's emphasis on quality health care at an affordableprice.

"In the long run, health care needs this kind of equipment,especially technologies that let people see things that they haven'tseen before and make diagnoses that they haven't done before,at a lower cost," Perozek said.