Xerox plans sell-off of digital x-ray firm dpiX

Xerox plans sell-off of digital x-ray firm dpiX

Imaging/military consortium emerges as potential buyer

The digital x-ray detector market is proving to be a tough one. For vendors, developing digital x-ray technology is expensive, and the payoff is uncertain. And potential customers are finding that these systems cost far more than what they're used to paying for digital x-ray technology.

Market dynamics are beginning to take their toll on vendors participating in this segment. Six months after the financial backer of AMLCD maker OIS Optical Imaging Systems decided to cut off its financing for that company (PNN 10/98), document firm Xerox is in discussions with a consortium of imaging and military firms to sell a majority interest in its AMLCD and digital radiography developer dpiX.

An offer has been received by the consortium, and negotiations are continuing, according to Xerox spokesperson Judd Everhart. In the event an acquisition is not completed, Xerox will by the end of the year wind down operations at dpiX, which was spun off from Xerox's Palo Alto Research Center unit in 1996. Xerox decided to exit the business primarily because the relatively small amount of revenue dpiX generated was not significant for a company the size of Xerox, according to Everhart.

"The flat-panel display and the x-ray sensor business looked promising at the outset, but it just hasn't been the success we hoped it would be," he said.

According to a source knowledgeable about the situation, dpiX had 1998 revenues of $11 million, and 1997 revenues of $8.5 million. Although Xerox invested more than $50 million in the venture, it has never been profitable, according to the source.

Xerox and dpiX declined to identify participating firms in the consortium, with the exception of display firm Planar, which issued a press release in March announcing that it had been informed by Xerox about its decision on dpiX. Planar employs dpiX's thin-film transistor (TFT) arrays for use in its commercial and military avionics displays.

An informed source said the consortium is believed to also include Varian Medical Systems (formerly Varian Associates), French digital radiography developer Trixell (a joint venture between Siemens Medical Systems, Philips Medical Systems, and Thomson Tubes Electroniques), and defense firm L3 Communications. Both Palo Alto, CA-based Varian and Trixell employ TFT arrays from dpiX in their imaging products.

Xerox's technology R&D lab, Xerox PARC spun off dpiX in March 1996 to commercialize TFT array technology that could be used both for digitizing x-ray studies and for viewing images. The company's first offering was FlashScan 20, which uses dpiX's basic TFT array but adds the electronics needed for image processing.

FlashScan 20 is an 8 x 10-inch amorphous silicon image sensor designed to be sold to OEMs for incorporation into x-ray imaging devices. That release was followed up by FlashScan 30, a 12 x 16-inch detector.

DpiX has pursued an OEM distribution model for its digital radiography technology. Trixell and Varian employ dpiX's TFT arrays, while Varian also markets the FlashScan detectors as a complement to that firm's Large Area Sensing Technology (LAST) fluoroscopy imagers.

Many large medical imaging OEMs have purchased FlashScan units for testing, however, according to a dpiX source who asked to remain anonymous. To date, no other medical imaging firm besides Varian has signed on to market FlashScan technology.

The healthcare component of dpiX's business is the most profitable for the company. It contributes about two-thirds of dpiX's revenues, while AMLCD sales to military avionics firms generate the remainder of the business, according to the dpiX source.

As part of its efforts to make dpiX more attractive to outside investors, Xerox and dpiX's management team decided last month to shelve plans to commercialize its Gradient 500 AMLCD 2.5K x 2K flat-panel gray-scale display (PNN 11/98) and its Expression 100 1280 x 1024 color display. The company showcased Gradient 500 at the 1998 RSNA meeting and debuted Expression 100 at the 1997 RSNA show (PNN 11/97). If market dynamics should become more favorable in the future, dpiX could potentially revive these products, according to the source.

Although Trixell declined to confirm involvement in the consortium negotiating to purchase dpiX, a Trixell representative said that a shutdown of dpiX would not affect production of its Pixium 4600 digital x-ray detector. Trixell has an additional supply of TFT arrays from another firm affiliated with a Trixell parent company, which it declined to identify.

As a change in dpiX's operations may affect other products in development, Trixell is evaluating various scenarios to ensure its double-sourcing strategy for TFT arrays, according to the firm.

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