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December 17, 2006

Now Misys hit by healthcare woes

Troubled software company Misys plc has hit a new problem in its US healthcare business, which had operated successfully while the company was dragged down by its UK-based banking software division.

By CBR Staff Writer

Mike Lawrie, brought in as chief executive in October to turn around the company, has had to move rapidly to make changes in the management of the healthcare business, after a 27% slump in new orders during the first half. In a trading statement he said banking businesses was making progress while its healthcare business is behind the performance of its peers. We are taking action to remedy this, he said.

A failed MBO by former chief executive Kevin Lomax led him to quit the company in October and Lawrie acknowledged that the uncertainty caused by the bidding process has compounded problems in the US.

Healthcare revenue was down 6% to 155.8m pounds ($306m) in the first half. Order intake in Physician Systems slowed significantly and Misys said it was clear the division was behind the performance of the market.

It blamed a number of sales execution issues such as changes to the sales force deployment models and compensation schemes. It was also affected by increased pricing and competitive pressure at the small community physicians end of the market. While it has begun to see some benefit from the actions taken to address the problems, it says it is too early to say if it will fully address the shortfall, though early indications are encouraging.

In banking systems, revenues have risen 7% to 124.8m pounds ($245.2m) and the company says core banking was making good progress, following its creation of processes to streamline its retail and wholesale operations.

Sesame, its IT services business for financial advisers that is up for sale, saw revenue rise 2% to 183.9m pounds ($361.3m).

Overall revenue was 1% higher at 464.5m pounds ($912.5m). Lawrie warned that there would be no quick fix for Misys’ problems. This will not happen overnight, this is a three-to-five-year plan, he said. Lawrie was previously a general partner with San Francisco-based ValueAct Capital, who has taken a 4.1% stake in Misys.

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