When General Electric Co. boasts in its corporate slogan that it "brings good things to life," most Americans think of the company's televisions, appliances and light bulbs.
But this week consumers heard about a far less familiar part of the Fairfield, Conn.-based conglomerate when GE announced that it is selling its consumer electronics division and expanding its medical technology business.
With Wednesday's announcement that it will buy the medical equipment business from French government-owned Thomson S.A., General Electric will solidify its hold on the $4.5-billion worldwide diagnostic imaging industry. The industry produces X-ray machines and other sophisticated equipment that give doctors an electronic "image" of what's inside a patient's body.
Already, the GE Medical Systems Group in Milwaukee dominates much of the industry--from ultrasound devices that can examine a fetus to X-ray machines that enable doctors to look at broken bones.
About half the magnetic imaging machines, one of medicine's newest and costliest technologies, as well as half the CT (or "CAT") scanners in use across the United States are machines manufactured by GE, according to Thomas Kemp, publisher of Diagnostic Imaging magazine in San Francisco.
Analysts estimate that GE's medical equipment business, which currently generates about $1.6 billion in worldwide revenue, will grow to more than $2 billion following the acquisition. As a result of its deal with Thomson, analysts estimate that GE will triple its market share in Europe to about 20% and also gain a significant share of fast growing Third World markets such as Brazil. Thomson is also a leading maker of ultrasound equipment used in the United States.
"General Electric is a powerhouse," said Paul Brown, a senior medical technology analyst at the San Francisco investment house Hambrecht & Quist Inc. "There is not a close competitor nationwide and this acquisition puts them--if not No. 1--then close to it worldwide."
The medical diagnostic imaging business is a small but growing part of the $426-billion-a-year U.S. health-care industry.
Recent efforts by government and private insurers to trim medical costs have slowed medical equipment purchases and created overcapacity in the medical diagnostic imaging industry.
Still analysts say that long-term demand for the equipment will be steady. That's because the devices--which enable doctors to peek inside the human body--can help quickly pinpoint medical problems and often "avert the need for more invasive kinds of procedures" such as exploratory surgery, said Randall S. Huyser, a health care analyst at Montgomery Securities in San Francisco.
What's more, half of all CAT scanners and magnetic imaging machines are being purchased not by cash-strapped hospitals, but by physicians' groups, independent investors and companies--such as MMI Medical Inc. of Pomona and Mobile Technology Imaging of Walnut Creek--which install imaging equipment in tractor-trailer trucks and rent them out to hospitals.
Despite the recent attention focused on General Electric's medical equipment business, the company's involvement with imaging devices dates back to 1896 when GE introduced its first X-ray machine.
Since then GE has branched out and become the leading maker of a host of diagnostic imaging devices, and today the GE Medical Systems Group in Milwaukee manufactures more than 26 different models of imaging equipment.
The devices include the multi-million-dollar magnetic resonance machines, which can provide detailed images of the body's soft tissues by utilizing a superconducting magnet. Publisher Kemp said the market for such machines is expected to grow between 15% and 20% annually during the next four years.
CAT scanners, sophisticated computer enhanced X-ray machines, already are widely used to do such things as scan the brain for signs of injury or cancerous tumors. But increasingly, their growth potential is being threatened by the more versatile magnetic resonance machines.
Another relatively new technique--nuclear imaging--also uses equipment produced by GE. This procedure involves the use of certain radioactive materials introduced in the body. It is often used, for instance, to locate cancerous tumors. Because of the specialized nature of the machines, the market for the device will grow less rapidly than for magnetic resonance machines, Kemp said.
While Kemp said demand for conventional X-ray equipment will not grow dramatically, he expects the market for ultrasound devices to grow at better than 6% annually the next four years.