OSI Systems Inc. over the past year has been making a big splash in the homeland security market, with its airport full-body scanners garnering both sensational headlines, and increasing orders in the United States and overseas.
But seemingly left on the sidelines has been the Hawthorne company’s health care business, which makes anesthesia delivery and ventilation equipment, patient monitoring systems and heart diagnostic devices.
Sales in that division were down 2 percent to $55.8 million in fiscal second quarter earnings released last week, even as revenue from the scanner division rose 30 percent to $76.7 million.
That lackluster performance may soon change. Chief Executive Deepak Chopra told analysts that the company has been quietly refocusing attention on its Spacelabs health care business, which is set for major growth.
“Over the next 12 to 18 months, we anticipate launching more new products than we have ever launched in the last five years,” he said.
Analysts say the changes are a long time coming. Brian Ruttenbur of Morgan Keegan credits Chief Financial Officer Alan Edrick, who came on board in 2006, with streamlining a myriad of systems that OSI inherited when it bought Spacelabs Medical Inc. from GE Medical Systems in 2004.
“Spacelabs was a consolidator that was bought by another consolidator, OSI, and it was a big mess for a while,” Ruttenbur said. “They are starting to do what their security business has been doing so well – coming out with new products every year rather than just put a new piece of plastic around last year’s model.”
What’s more, hospitals have begun to recover from the recssion and upgrade equipment as they install new electronic medical records systems. OSI has been touting the open-architecture of its products, which allows them to be compatible with equipment from other makers. Analysts said that should help it compete with multinationals that do business in the sector, such as General Electric Co.
OSI did not return calls for comment.
However, neither Ruttenbur nor analyst Michael Kim of Imperial Capital LLC believes the health care division can regain its position as OSI’s leading cash cow,
“Security is growing at a faster rate and will become a larger part of overall revenues in 2011, especially with the orders coming from the Middle East and Europe,” Kim said.
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