US computer services company, Keane Inc, continued its recent acquisition spree, yesterday, swooping for niche IBM AS/400-based healthcare services company, First Coast Systems Inc. Raymond W Paris, Keane’s vice president and general manager told ComputerWire that the deal was part of the Boston-based company’s overall strategy to diversify its offering as Y2K conversion business dries up, and consolidate vertical market portfolios.
Paris said the deal gained Keane access to the AS/400 market, opening up lucrative new contracts and the opportunity to cross-sell products and services. Privately-owned First Coast Systems Inc of Jacksonville, Florida, provides systems and services to hospitals and healthcare institutions based exclusively on the IBM mid-range computing platform. First Coast will be folded into Keane’s Healthcare Solutions Division, which currently earns 9%, or more than $100m, of the company’s overall revenue. Paris priced the current overall market opportunity for healthcare IT services at $1bn-plus and said the market currently offered high margins for service houses.
Keane declined to put a value on the all-cash deal, which is expected to close before Christmas. The company mounted a similar acquisition of a privately-owned vertical market service company, earlier this month, announcing a deal to buy niche federal government player, Anstec Inc, for an undisclosed sum. Meantime, yesterday’s deal brings Keane’s acquisition count for 1999 to seven, a company spokesperson said. Other deals have included the purchase of UK software services firm, Parallax Solutions Ltd in May and Californian e-commerce consulting house, Jamison/Gold LLC in June, both for undisclosed sums. Paris said the deals form part of Keane’s policy to plug anticipated revenue shortfall from the post-millennium demise of Y2K code conversion business, which Keane has been effective in winning. In its third quarter to September 30, the company trumpeted an 18% revenue growth from non-Y2K business, but reported revenue down more than 10% on the year-ago at $255.6m, due to shrinking millennium bug earnings. The company warned the phenomena would also drag fourth-quarter earnings below par.
