Mike's Last Word

Here's Mike Cannavo's final opus on the topic.  Now we can all get back to work. 


Dr. Dalai and I listened in to the Merge 1st quarter earnings call.  We were having fun furiously sending e-mails back and forth (probably should have just IM'd each other) wondering about some of the comments made.  What I heard didn’t exactly install complete confidence in the future of the companies. But the Dalai is right- it’s time to move on. But while he’s moving on, I’m Movin’ Out. After I finished the call Billy’s Joel’s Movin Out came on the radio in my office and the lyrics hit me-

It seems such a waste of time

If that's what it's all about

If that's movin' up then i'm movin' out.

What this deal is all about is dollars- I have said that time and again. If Merge makes it with the debt they have incurred, it will be a miracle second only to loaves and fishes and might even overtake that too (Sorry JC- take it up with me after I die). Twenty three million dollars in annual interest payments is a pretty big nut to crack considering AMICAS lost money again and Merge didn’t exactly set the world on fire even when you factor in some of the costs for the AMICAS acquisition. That’s about $6M per quarter just to keep the lights on – but we’ll just have to see.

Merge has to cut costs- no one will debate that- but I support Dalai saying that slicing and dicing the AMICAS R&D team just wasn’t the smartest way to save a buck. But what’s done is done. The development team said adios trusting Merge like Elin trusts Tiger.

If you watch the video interview on http://www.businesspov.com/article/322, you will note at around the 1:50 mark the goal set forth by Mr. Ferro back in 2008:  to bring Merge from the brink of death where it was (at $0.28/share) to become at least a $500M company. Can he do it with the AMICAS purchase? Perhaps. He’s about a third of the way there with Merge having a market cap of just under $177M as of today, more than tripling the value of the company since he took it over back in 2008. But not all of his investments for Merge seemed have panned out so far. According to the web site http://markets.ft.com/ft/tearsheets/businessProfile.asp?s=MRGE:NMQ the the value of Merge stock after the $20M purchase of eTrials Worldwide last July declined just over 19%, while the value of Merge stock after the purchase of Confirma, Inc purchased in September 2009 for $22M declined just over 35%. Merge stock hasn’t exactly skyrocketed since the AMICAS purchase was announced last week either, going from a high of $2.67/share to a low of $2.33 and closing at $2.35 yesterday. Again I know nothing about the financial world but one would at least think that there would be a wee bit more excitement over Merge becoming the largest independent PACS player in the marketplace than this chart reflects….and starts with the day after the announcement that the deal was officially made:

Now today the stock shot up like a meteor after the press conference hitting as high as $2.46 before tumbling down to $2.29 and settling close to yesterdays $2.35 close as I write this but that’s the nature of the beast.

Do I trust Merge to do the right thing? Spike Lee I’m not so all I can do is hope and pray. They seemed to hide a lot on the call- I loved the pregnant pause when an investor pushed them for details on who they bought recently for a little over $1M (Docusys) when it was obvious they didn’t want to disclose this information for whatever reason. I also loved how they danced around earnings for Confirma and eTrials (“We don’t break those out” was their answer). I think the investor just wanted to know how the $42M invested in both companies was working out- and based on the answer (or lack thereof) it seems like it’s not. And when I heard the words on the call “payable at our discretion” the hair on the back of my heard stood up, but alas I am not a financier so….what do I know?

So we now have an invite to go to Chicago. I feel like the guy who got a wedding announcement after the wedding and reception already took place with someone just looking for a gift. That is why my son didn’t send out graduation announcements- it’s a tacky way of saying “Hey, me some send money!!) (It’s hard to believe my oldest is going to graduate this year. Seems like just yesterday that he…)

I wish Messrs Ferro, Dearborn and others at Merge had contacted us sooner. We would have been able to help them better. Lord knows we tried- hard- and to no avail. But as I tell my kids, life is about the decision you make- and those you don’t. I wont send a gift or a card until Merge reaches its first year anniversary post AMICAS, but like the Dalai will be there to counsel them if they need it. After all, we are all in this game together…Merge obviously has the need to know what is going on in the PACS arena from the customer standpoint, and who better than the Dalai and I to guide them?

The leadership at Merge is run by brilliant entrepreneurs- men much younger and more financially savvy than the Dalai and I- and believe it or not we really do want you to succeed.  The Dalai and I live in the PACS world- it occupies a large part of our lives. We know PACS. Use us. And before the cynics come on here thinking I’m pining for a large PACS consulting contract with Merge know that is not the case or anywhere near it. The Dalai and I both have offered to provide all sorts of input to the new company for free- yes, FREE. Just pick up the phone and call us…

Know that offer still stands. Merge stands on the precipice of being either a zero or a hero. All it takes is a single call...or two….

We’ll be waiting….