New trouble for Misys: No CEO

Division's profit, revenue had fallen

In the wake of "unacceptable" financial performance at Misys Healthcare Systems, the CEO of the Raleigh-based company has resigned.

The departure of Tom Skelton, chief executive of the electronic medical records company since March 2000, was announced Thursday as part of a broader reorganization at its British corporate parent, Misys Plc.

After expanding rapidly in recent years, Misys Healthcare is struggling with intense competition and declining sales, especially to hospitals and small doctors' offices.

The company also was hurt by a reorganization of its sales force about 12 months ago that disrupted operations, said Kevin Ashton, director of equity research at London's Bridgewell Securities.

Given the company's struggles and the hiring of a new CEO at the parent company, Skelton's exit isn't surprising, Ashton said.

IBM veteran and former Siebel Systems chief executive Mike Lawrie was named CEO of Misys Plc in October after the struggling company devoted months to a proposed buyout that fizzled out.

"I do think it is a smart move," Ashton said of Skelton's exit. "You really need a fresh face to look at things objectively."

According to financial results released Thursday, the health-care division's revenue fell 6 percent to about $290 million for the six months that ended in November. Operating profit dropped 22 percent to $35.5 million.

Misys Healthcare has 2,700 employees, including about 800 at its Raleigh headquarters.

The latest results were "disappointing," Lawrie said on a conference call with reporters.

"Frankly, it was an unacceptable performance," he said. "We did not grow with the market. We did not compete effectively."

Skelton said he resigned voluntarily and will remain through the end of March to assist with the transition.

"Now is a good time for me to do something different," said Skelton, 46. He expects to stay in the Triangle.

The company is still developing its strategy to boost the performance of the health-care business and expects to release some details in March.

Paul Lewis, 53, who recently joined Misys Healthcare as senior vice president of sales and services, is acting as general manager of the business while the company recruits Skelton's successor. Lewis is a former worldwide general manager of IBM's consulting business who received an MBA from UNC-Chapel Hill.

"We're not growing as fast as we need to," Lewis said.

Asked about the possibility of layoffs, Lewis didn't rule them out, saying: "We're looking to win. We need great people to do that."

Misys has done some minor tinkering with its work force. The company laid off "a little more than 10" employees Thursday -- none of whom worked in Raleigh -- in conjunction with the decision to integrate a stand-alone product into another software package, said Mike Holsinger, a spokesman.

"It's a very small action, and completely coincidental that it happens today," he said.

This month, the company laid off a smaller group of employees who worked in physician systems.

Ashton said Misys Healthcare has been hurt by its weakness in the hospital software market. Although it has a strong product that appeals to hospital laboratories, it lacks appealing offerings for other departments and has fallen behind in the shift to "more integrated, hospital-wide systems," he said.

Misys' strength is selling software to physicians, but that market isn't expanding as quickly as the hospital market, Ashton said.

Lawrie said that over the past six months, Misys experienced a drop-off in business from physician practices with fewer than 10 doctors. The company saw some improvement in that market at the end of 2006, but, he added, "I think it's too early to call it a turnaround."

(Staff writer Anne Krishnan contributed to this story.)