The news came as the company reported an $8.4 million operating loss for the fourth quarter ending Dec. 31, from an $8.3 million operating profit during the same time period last year. The operating income dropped 77.9 percent, to $6.6 million in 2012, from $29.1 million in 2011.
But Merge also had a slight bump in net sales, to $64.7 million in the fourth quarter, from $64.1 million during the same period in 2011, which beat analysts' expectations, noted Deepak Chaulagai, a senior research analyst in health care at Minneapolis-based Dougherty & Company LLC.
Total net sales for the year ended Dec. 31 were $248.9 million, a 7.1 percent increase, from 2011, when net sales totaled $232.4 million.
“I clearly think they have the resources to continue to operate as an independent entity,” Mr. Chaulagai said in an interview.
“But the key is execution,” he added.
Dougherty & Company upgraded Merge's stock from to a Buy rating, from Neutral.
In a research note, Mr. Chaulagai said Merge had a strong pipeline with several large potential deals.
With physicians having to exchange health records electronically to avoid penalties from the federal government, there's a market for Merge. But the company also faces threats from a competitive industry and a customer base that's in the midst of consolidation, potentially shrinking the client pool.
Among quarterly highlights, Merge said it signed more than 190 contracts in the fourth quarter for a platform that manages and runs clinical studies, driving a 79 percent year-over-year bookings growth, according to the company statement.
A spokesman for Merge did not immediately comment. The company's chairman and largest shareholder is Michael Ferro, who also heads Chicago-based venture capital firm Merrick Ventures LLC and is chairman of the parent company of the Chicago Sun-Times.