Originally Published MX November/December
2001
COVER STORY
A Big Fish
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GEMS brings in about $8 billion per year, which amazingly amounts to a drop in the bucket compared to the $130 billion in revenues garnered each year by all of GE. In fact, GE has such a diverse array of products in its portfolio that some investors refer to the company as being its own index fund.
While it may seem that the medical business could easily get lost in such a massive portfolio, nothing could be further from the truth. GE Medical Systems is more than the accumulation of its annual revenues—more than a small fish in a big corporate pond. GEMS is uniquely tied into the political structure of GE. The company served as a springboard for GE's current chairman and CEO, Jeffrey Immelt, to succeed long-time leader Jack Welch. During the nearly three years he spent guiding GEMS, Immelt set a double-digit growth pace that his successor, Joe Hogan, now must try to maintain, despite less than ideal general market conditions.
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Procedure
volumes for medical imaging have shown steady growth. Source: IMV Medical
Information Division.
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Hogan is buoyed by the consensus among medical imaging executives that imaging equipment doesn't follow the general rules of macroeconomics. Historically, the sector has been insulated from forces that would otherwise dissuade customers from buying equipment. Over the past decade, the demand for medical imaging procedures has steadily risen in every modality (see figure).
Over the short term, however, increases in equipment productivity could create overcapacity within the installed base that could absorb rising demand. Even more ominous is the heavy reliance of revenues on magnetic resonance imaging, computed tomography, and diagnostic ultrasound. The revenues brought in by each of these three product types vastly overshadow those of other modalities in GE's offerings, including radiography, nuclear medicine, cardiac catheterization, and x-ray angiography.
The challenge for Hogan is to bolster demand for imaging products by coming up with equipment that supports novel clinical applications. Initiatives begun under Immelt and his predecessors promise to do just that.
GEMS is aggressively marketing cardiac catheterization, radiography, and mammography systems based on digital sensors that could provide novel insights into disease processes. Earlier this year the company released the Discovery LS, a single machine that combines two distinct modalities—CT, which provides anatomic reference points, and positron emission tomography (PET), which takes pictures of metabolic functions. Hogan and colleagues framed the system as providing the means for earlier and more-accurate diagnoses of cancer, and more-effective monitoring of patient response to new anticancer drugs.
For these reasons, GEMS holds a special place in the GE family of companies, one that will not likely be dislodged any time soon. If anything, the past direct involvement in GEMS of GE's new chairman and CEO will enhance this potential and elevate the medical equipment business to new heights.
Copyright ©2001 MX
