Eastman Kodak Company has decided to acquire Algotec Systems Ltd., a leading developer of advanced picture-archiving-and-communications systems (PACS), in a move that improves Kodak’s competitive position in the growing market for PACS, which enable radiology departments worldwide to digitally manage and store medical images and information.

Kodak plans to acquire privately held Algotec for $42.5 million in cash and expects the transaction to close by year-end. Algotec, whose technology is among the best in the PACS world, will become the “center of excellence” for developing Kodak medical PACS products and attendant 3D imaging technologies.

“This move will bolster our current PACS development efforts and will give Kodak greater leverage in a market growing at 15-20 per cent annually,” said Dan Kerpelman, president of Kodak’s Health Imaging Group, and a senior vice president of the company. “We will own Algotec’s intellectual property, including its unique source code – ideal for developing products in the rapidly growing category of web-enabled PACS. By fully utilizing this intellectual property, we will create a stream of compelling product innovations and, in doing so, will accelerate the growth of our business.”

The PACS market is fertile for growth. Banc of America Securities’ “2003 Hospital CIO Survey” indicates that almost 60 per cent of chief information officers in US hospitals plan to purchase PACS within the next three years. The price of a PACS system ranges from $500,000 to $3 million or more, depending on exact requirements. “Algotec’s technology will put us in a better-than-ever position to capitalize on this opportunity,” Kerpelman said, “as will changes we are making in our field operations.”

Sales and technical specialists that serve multiple product groups in Health Imaging soon will begin supporting its PACS operation exclusively. “We also plan to double the size of this team by year-end, putting a total of some 40 specialists into the market to serve customers,” Kerpelman said. “This new field model and our planned acquisition of Algotec represent a one-two punch that will give Kodak a sharp, new competitive edge in PACS,” he added.