Embattled healthcare technology firm Allscripts named its board member and former chief operating officer of rival Cerner Corp Paul Black as its CEO, replacing Glen Tullman, and said it ended a review of strategic alternatives.
The move, effective immediately, raises new questions for the direction of Allscripts Healthcare Solutions Inc after activist shareholder HealthCor Management installed three of its nominees to the company's board last summer, following a bitter fight with Tullman.
Allscripts has struggled to boost new business following its acquisition of Eclipsys Corp in 2010. It had hoped to expand into software and equipment for hospitals and healthcare systems with that purchase but ended up losing business to Cerner Corp and closely held Epic Systems Corp.
The company, which has been the subject of takeover interest, also said on Wednesday that Lee Shapiro would step down as president.
Allscripts shares, which have nearly halved in value this year, were down 19 percent at $8.70 in extended trade on Wednesday. They had closed at $10.68 earlier on the Nasdaq.
"Both Glen and the board of directors believe that after Glen's 15 years of leadership, it is the right time now for a new leader to focus on execution, position the company to deliver shareholder value and lead Allscripts through its next phase of growth," Allscripts spokeswoman Ariana Nikitas said.
Tullman's resignation comes months after Healthcor cited problems with his leadership and demanded his ouster.
"I think Glen has been under a lot of pressure since the attempted coup by former board members and HealthCor demanded some changes and Allscripts agreed to put some of HealthCor's appointees on the board," said Anthony Vendetti, an analyst at Maxim Group, adding he has personally known Tullman since he became CEO.
Black left Cerner in 2007 after more than 12 years with the company, helping to make it a market leader with more than $1.5 billion of annual revenues and playing an instrumental role in its double-digit organic growth, Allscripts said.
"I think (Black) is the ideal candidate for CEO," said Vendetti, who has a "buy" rating on Allscripts stock and a price target of $15.
"We view this news positively as Mr. Black is well regarded in the industry. With that said, we maintain our neutral rating for the time being," Steven Halper of Lazard Capital Markets wrote in a note.
LONG ROAD TO GROWTH
Allscripts stock has fallen more than 42 percent this year amid weak bookings that hampered sales and profit.
The company withdrew its full-year outlook in November, as it began to consider strategic alternatives. Later that month, Reuters reported that Blackstone Group LP had emerged as the frontrunner to buy the company but that the two sides were far apart on price and a deal was highly uncertain, according to people familiar with the matter.
Black is no stranger to the buyout industry, having served as operating executive of Genstar Capital LLC, a private equity firm, and senior advisor at New Mountain Finance Corporation, an investment management company.
His background may come in handy as he seeks to turn around the company's financial performance in a difficult environment for healthcare IT firms. These companies face a dwindling customer base as hospitals consolidate physician practices into their existing vendors.
"The expectation is that it will take some time (for the company) to fundamentally turn around its business," analyst Vendetti said. He added that Allscripts' main goal should be to re-establish client trust in their products and the ability to integrate their product portfolio.
A comment in the Allscripts statement from Tullman, who had been CEO since 1997, made no reference to the reasons for his departure. He said he was confident that Allscripts was in good hands and had a bright future ahead.
Analyst Halper said he remained concerned about the long-term growth prospects of the company.
"With the selection of Paul Black, hopefully the company can redefine its strategic direction," Halper said.
(Additional reporting by Ransdell Pierson and Greg Roumeliotis in New York; Editing by Gary Hill, Saumyadeb Chakrabarty and Muralikumar Anantharaman)