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Uncertainty at Merge grows after resignation(Milwaukee Journal Sentinel, The (KRT) Via Thomson Dialog NewsEdge) Aug. 22--The uncertainty surrounding Merge Technologies Inc. -- a medical software company in the midst of a broad investigation into its accounting -- grew on Monday with the resignation of another top executive. Merge, based in West Allis, said that Brian Pedlar, interim co-chief executive, left the company on Friday, less than two months after being tapped for the position. He took the job in July after three of Merge's executives resigned. Legal counsel for Pedlar notified Merge on Thursday that Pedlar would leave the next day. Pedlar was president of Cedara Software, a Toronto company that Merge bought last summer. The acquisition doubled Merge's size and put the company on track to report revenue of more than $95 million for 2005. Merge stock fell 53 cents, or 6.9 percent, on Monday to close at $7.15 a share. The stock is down about 76% from its 52-week high of $30.05 reached in December. The company, which does business as Merge Healthcare, develops software for diagnostic imaging centers and small and midsize hospitals. It also writes software for manufacturers of medical imaging equipment. Since February, when Merge announced that it was postponing the release of its year-end results, the news has gotten progressively worse. Its chief executive left in May, and then its founder, the chief financial officer and a senior vice president resigned in July. An investigation into the company's accounting, apparently sparked by a letter to the company's board, has broadened. And the company has said that its financial statements going back to 2002 should not be relied upon. The Nasdaq market has given Merge until Aug. 29 to file its financial results for 2005 and the first two quarters of this year, as well as the restated financials going back to 2002. David A. Sackler, managing director of Moab Capital Partners LLC, a small hedge fund in New York City, warned about reading too much into Pedlar's resignation. Merge said in July, for instance, that it was giving key employees additional incentives to remain with the company. But Sackler added, "It is never good when senior managers leave. This was one of the people that they were hoping would turn this around." Robert J. White, who was interim co-CEO with Pedlar, will become interim president and chief executive. He reports to Michael Dunham, the company's chairman and interim "principal executive officer." In July, Merge executives also acknowledged that sales have been hurt. That was the first indication that the uncertainty has hurt the company's fundamental operations, notes a research report by Canaccord Adams, a brokerage and investment banking company. Merge also is beginning to spend its available cash, which stood at about $60 million, down from $64 million at the end of December. Yet that still worked out to about $1.76 a share in cash as of July. Further, the company has a market value roughly equal to what it paid for Cedara last summer. That has prompted several large hedge funds to buy large stakes in the company. Copyright (c) 2006, Milwaukee Journal Sentinel Distributed by McClatchy-Tribune Business News. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |