After a banner year on Wall Street, financial technology firm Broadway & Seymour Inc. last week agreed to sell software rights and assets related to a division that specializes in document imaging systems.
The deal with Medaphis Corp., a provider of business management services to doctors and hospitals, is worth $32.2 million in cash, company officials said.
The agreement with Atlanta-based Medaphis involves the transfer of so- called "source code" for the imaging software, as well as shifting three systems-consulting contracts and about 100 people from Broadway & Seymour's Gateway Conversion Technologies unit, company officials said.
As a result of the transaction, Medaphis gains the right to sell Gateway's imaging system and related work-flow consulting services to the health care industry.
At the same time, Broadway & Seymour retains ownership of Gateway's imaging software and three banking-related systems integration contracts, said William Neal, chairman and chief executive officer. He added that the contract with Medaphis includes a one-year noncompete clause that prevents either company from selling the system into the other's primary market.
The agreement will give a quick earnings boost to Broadway & Seymour - it acquired the imaging business in 1992 for about $9 million.
The seeds of the deal were planted last year, Mr. Neal said, when Medaphis signed a multimillion-dollar contract with Gateway to install and maintain a document imaging system for storing and tracking the patient payment records of health care providers.
"While this business was very beneficial to us, it was also very distracting in terms of trying to pursue our core mission in banking," Mr. Neal said. "At the same time, imaging is a key technology for health care, and it would have cost Medaphis twice as much as they agreed to pay us to develop something similar on their own. So we got the best of both worlds."
Paul Bloom, an analyst at Volpe, Welty & Co. in San Francisco, agreed with Mr. Neal's assessment. "They got a good amount of cash up front, plus a payment stream into 1995 that will help their earnings," he said.
Mr. Bloom noted that his firm, which is a market maker for Broadway & Seymour's NASDAQ-listed common stock, remains bullish on the company's prospects this year, despite the fact its share price has more than doubled since the beginning of 1994. The shares were trading at nearly $21 last week.
He noted that last year's big rise followed a selloff in Broadway & Seymour's stock after the company reported it had incurred unexpected losses and took a $5 million writedown related to an acquisition in the third quarter of 1993.
After revamping management, "we had three excellent quarters in 1994," Mr. Neal said, "and we have affirmed with analysts that we should have a good fourth quarter."
Mr. Bloom is optimistic for the longer term, as well. "They made a big bet on imaging technology . . . ," he said, "which will allow Broadway & Seymour to become one of the key players in the banking software market in the 1990s. We think these guys are going to hit a home run."