Vision Ten offers path for broader Lumisys line

Laser film digitizer supplier Lumisys continued due diligencelast week as it considered a merger with Vision Ten, accordingto Stephen J. Weiss, Lumisys president and CEO. Vision Ten isa specialist in charge-coupled device (CCD) digitizing technology.The two California firms signed a letter of intent on the mergerin December and hope to complete the deal by the end of this month.

Since Vision Ten is already a public company, the intent isto have this entity acquire privately held Lumisys. The expandedpublic company would then change its name to Lumisys and continueoperating with the Lumisys management and Silicon Valley basein Sunnyvale. Vision Ten is currently located in Torrance, insouthern California. Current investors in Lumisys would be majorityshareholders of the expanded Lumisys, Weiss said.

Vision Ten spent several years attempting to sell a film digitizingand distribution system called RITA (radiographic imaging, transmissionand archive). Late last year the company switched its focus awayfrom direct distribution of RITA and to OEM sales of its CCD digitizer.A multi-unit OEM supply agreement was signed with Europe-basedDatabase Tecnologie.

Four years ago, Vision Ten was spun off from CCD digitizermanufacturer Truvel in an effort to develop medical imaging systemsutilizing Truvel's CCD scanner technology. Truvel put up halfof the initial funds for Vision Ten, but ownership was immediatelydistributed to Truvel shareholders. Truvel founder and CEO RichardK. Gerlach left to head up Vision Ten (SCAN 4/12/89).

Since the spin-off, Truvel entered bankruptcy and was subsequentlypurchased by Vidar of Herndon, VA (SCAN 10/4/90). The firm continuesto sell CCD digitizers to medical OEMs.

Lumisys introduced its first laser products, a digitizer anda camera, at the 1989 Radiological Society of North America meeting.Weiss joined the firm shortly thereafter, following his successfulturnaround of medical workstation manufacturer Virtual Imagingfrom a direct marketing to OEM supply strategy (SCAN 12/27/89).

Lumisys is now strictly an OEM digitizer supplier. The firmwithdrew from the medical laser camera market two years ago afterboth 3M and Kodak introduced similar systems. Lumisys also developeda computed radiography reader for Kodak, which was sold completelyto that major medical imaging vendor. Two of the firm's largestOEM customers for its high-end laser digitizers are Kodak andSiemens, Weiss said.

CCD DIGITIZING TECHNOLOGY is less powerful than laser products--andless expensive. Lumisys plans to use the Vision Ten technologyto widen its product offerings on the lower end. Many of its smallerteleradiology customers do not need the 12-bit capability of alaser digitizer, Weiss noted.

"In some instances, the laser technology is overkill,"he told SCAN. "For teleradiology applications, where theyare only viewing 8 bits of information on a VGA monitor, the CCDproduct is the product of choice."

Vision Ten had developed its CCD technology to the point whereit was competing with the lower end of the laser digitizer niche,in both performance and price. Lumisys, however, will seek toincorporate this technology in lower priced offerings that willsit below the laser systems in its product line.

"We will look seriously at how to price it (the CCD technology)correctly and meet the medical community's requirements for digitizing,"Weiss said. "For primary diagnosis, though, one needs toapply the best technology possible, which is the laser standard.We will not seek to reduce quality in the imaging market."

While the RITA sub-PAC system will come along with the restof Vision Ten's technology, Lumisys does not expect to sell itin competition with its own customers, at least in the U.S., Weisssaid.

Although Lumisys will gain a public stock listing through theback door, this was not a significant reason for the merger. Thelisting will provide few benefits to the company or its venturebackers, he said. Vision Ten's stock is on the small capitalizationlist of NASDAQ.

Last year was the first profitable year for Lumisys, largelybecause the company took a write-off in the prior year due toits withdrawal from the laser camera market, Weiss said. Normally,the company would have waited for two years of profitability beforelaunching a public offering.

Lumisys had been looking to extend its product line eitherthrough internal development or acquisition. Acquisition of theCCD technology offered a more rapid path to market, he said.

"We looked at CCD technology on our own. There is no magicto the technology, but it takes time and is expensive to reachmarket. We decided not to reinvent the wheel when the wheel wasavailable elsewhere," Weiss said.