Perot eyes healthcare acquisition to drive growth

BANGALORE (Reuters) - Information technology services company Perot Systems Corp (PER.N) plans to make an acquisition for its healthcare segment, which accounts for about half its revenue, as large contracts get difficult to come by in a slowing U.S. economy.

"An acquisition in the healthcare space from anywhere in the world is one of the areas that Perot is concentrating on," Chief Executive Peter Altabef told Reuters in an interview.

However, he did not reveal if Perot identified a potential target or how much money it would spend on such a deal.

Tough macroeconomic conditions have forced Perot's larger clients such as hospital chains and health insurance providers to cut down on IT spending, crimping the company's healthcare revenue growth.

Revenue from Perot's healthcare segment grew just 3 percent in the second quarter from a year ago compared with 34 percent growth in the first quarter.

The lack of large contracts has eroded Perot's healthcare revenue to 46 percent of overall revenue in the second quarter from 54 percent in the fourth quarter of 2007.

"The blip in some of the segments will actually allow us to make acquisitions on a more favorable basis, as well as to continue to invest internally on our solution development," Altabef said.

Perot Systems spent about $425 million on M&A in the last 5 years, according to Reuters data.

SHIFT IN FOCUS

The company, which was founded by former U.S. presidential candidate Ross Perot, is also shifting its focus from large contracts, which are drying up amidst the slowdown, to mid-sized players in the healthcare segment.

"Clients such as community hospitals and government healthcare, who had not spent much earlier, are playing catch-up for competitive purposes, and Perot is now using this opportunity," Altabef, who has been with the company for about 15 years, said.

According to Bernstein Research analyst Rod Bourgeois, Perot is gaining traction in healthcare opportunities in specific Middle East countries, Europe, government healthcare and community hospitals.

CEO Altabef said Perot is also focusing on strengthening its position in markets like the Middle East, Europe, China and Latin America to boost revenue.

"Perot has been grappling with a dearth of large-sized sales deals in the provider space of healthcare, but its backup strategy of exploring smaller players in the sub-segment has now started bearing fruits," Altabef said.

In the healthcare industry, providers refer to healthcare providers such as hospitals, physician practices and public sector agencies. About 75 percent of Perot's healthcare revenue comes from provider clients.

Perot has lost several accounts in the healthcare segment over the past few years and had relatively few wins -- although that is also true of their competitors in the provider space, Health Industry Insights analyst Marc Holland said in an email.

Rival Cognizant Technology Solutions (CTSH.O) has also reported a softness in its healthcare segment, mainly due to the scaling back of one of its top five clients in the payer side of the business, which includes insurance carriers and other third-party payers.

Perot's other competitors in healthcare IT include Affiliated Computer Services Inc (ACS.N) and International Business Machine Corp (IBM.N).

(Editing by Gopakumar Warrier)