iSoft up for sale as revenue declines
Troubled UK healthcare software provider iSoft said this morning that it has received expressions of interest from a number of parties interested in either acquiring the company, taking a large shareholding, or creating a significant strategic alliance with the company. This interest has come from both financial investors and corporations with strategic interests in the healthcare market. The board has decided to open discussions with a number of these parties 'with the objective of clarifying the options'.

OVUM. Tola Sargeant

iSoft also said that its new-business revenues have been affected by its recent bad press, and that it currently expects a revenue decline in H1 2007 and FY 2007 of 10% to 15%.

Comment:

iSoft's new arrangement with its banks, announced in August, bought the company some time, but these facilities will become progressively more onerous through 2007 so the company has had to address its longer-term funding and strategic options. Over the last few months it has been doing all the right things including taking further action to reduce its cost base and compiling a new business plan based on streamlining its product portfolio and rolling out its next generation software, Lorenzo, to the NHS from late 2007 through 2008. On the basis of this plan, iSoft expects to return to revenue growth in FY 2008.

But these actions alone are not enough. iSoft needs to secure long-term capital, and acquisition or a rights issue have been the most commonly talked about solutions. Both CSC and BT have been rumoured in the press as potential suitors for the beleaguered software firm but we think both are highly unlikely candidates. BT is now working with iSoft's rival Cerner in London, while CSC already has the right to step in and manage the development of iSoft's software should it fail to deliver, so it is difficult to see what it would gain from acquiring the company.

Financial investors seem more likely suitors or, perhaps, a non-UK healthcare company looking to acquire iSoft's presence and assets in Europe and offshore development facilities in India. News of a potential sale lifted iSoft's shares by 6% in early trading but they are currently trading down a little at about 55p - a far cry from their 52-week high of 420p.