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Allscripts to consolidate offices, shed employees


By Kristen Schorsch, Crain's Chicago Business
Posted: February 20, 2013 - 7:00 pm ET
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Allscripts Healthcare Solutions is consolidating offices and laying off employees this year, a sign that, with new leadership at the helm, the Chicago-based company could once again be looking for a buyer.

The move also highlights an about-face for a company that has undertaken an aggressive expansion in recent years.

Allscripts, which develops and sells software for electronic health records, plans to close 12 offices and one warehouse in North America as part of a plan to create a more simplified and efficient organization, Chief Financial Officer Richard Poulton said in a company filing on Tuesday.

“We are putting a strong operational focus on the business to streamline the organization and reduce our cost of doing business,” CEO Paul Black said in an earnings call the same day to discuss the company's fourth-quarter results.

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Wes Rishel, a McKinleyville, Calif.-based vice president and analyst at Gartner Inc., an information technology research and advisory firm, said he wasn't surprised by the shift in strategy given the recent upheaval at Allscripts.

In December, CEO Glen Tullman stepped down after about 15 years at the helm.

Mr. Tullman had been on shaky ground since April, when Allscripts suffered one of its worst quarters in the company's history. The tumult came to a head when a group of renegade board members challenged his leadership, favoring then-Chairman Philip Pead. Mr. Pead and the other dissidents resigned after a majority of the board voted to stick with Mr. Tullman.

Mr. Black was named CEO upon Mr. Tullman's departure.

Just last month, an investor that was once one of Allscripts' largest shareholders divested itself of virtually all of its stock in the company.

Putting cost controls in place, rather than expanding, signals Allscripts could be returning to the market two months after the company said it was no longer considering a sale after receiving offers from private-equity companies, Mr. Rishel said.

“I think almost anyone would say that that sounds like they're getting ready to shop the company,” said Mr. Rishel, who has been covering Allscripts for about 10 years. “If they can show they're controlling their costs, then they're open to a wider variety” of potential buyers.

On Wednesday, an Allscripts spokeswoman said, “We're controlling costs better because it makes good business sense,” adding that the company doesn't discuss speculation or rumors.

Allscripts plans to consolidate operations into seven main facilities in North America by year-end, Mr. Black said on the earnings call. Company officials did not say in the filing or on the call which locations would close or how many people would be let go. Allscripts has more than 6,000 employees at 46 locations in 24 states, as well as at six international locations, according to the company's website.

The spokeswoman did not know how many employees would be terminated but said many of the sites slated for closure have fewer than a dozen workers and many employees will be given the option of working from home.

The consolidation involves pretax costs of about $10 million for employee severance, up to $16 million in relocation costs and about $3 million in lease exists, the filing said. Mr. Poulton noted in the filing that the figures could change depending on the level of relocations and terminations, among other aspects.

Also Tuesday, Allscripts reported a spike in bookings, to $180.7 million in the fourth quarter that ended Dec. 31, a 44.8 percent drop from the year-earlier period, but 11.6 percent more than in the third quarter. Bookings reflect the value of executed contracts for software and services, among other aspects.

Total net revenue in the fourth quarter decreased 9.6 percent, to $350.9 million, from $388.2 million in the year-earlier period. The company also had a $26.6 million operating loss in the fourth quarter, down from a $45.6 profit during the same year-earlier period.

“Our fourth quarter and 2012 financial results did not meet our expectations,” Mr. Black said in a statement. “I have been actively engaged with our clients and team members, and we have taken initial actions to focus the company on attaining results for our clients and shareholders.”

Allscripts shares traded at $12.59 Wednesday afternoon, up 12.6 percent since closing on Tuesday at $11.18 a share. Still, the price was 21.4 percent lower than in April, when the dismal first-quarter earnings were announced.


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