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IBM Stock Jumps For Buying Truven Health At Twice Its 2012 Price

Cerner stock headed down Thursday morning and IBM ‘s jumped after the latter disclosed that it’s buying Truven Health Analytics for $2.6 billion, twice Truven’s sale price four years ago. Like Cerner ( CERN ), the largest pure-play health care software provider in the U.S., smaller Truven provides cloud-based health care data and analytics. Truven counts 8,500 clients, including federal and state agencies, private employers, health plans, hospitals, clinicians and life science companies. Cerner’s primary clientele is large hospitals, though it serves many others, too. IBM stock was up 5.5%, near 133, in morning trading in the stock market today . Following two bad days after guiding Q1 and 2016 below analyst estimates, Cerner was down another 2%, near 52, in morning trading Thursday, 31% off an all-time high set April 13. Smaller rivals Allscripts ( MDRX ) and Athenahealth ( ATHN ) were down 1% and 3%, respectively. Quality Systems ( QSII ) stock was up 1%. Oracle ( ORCL ), which also developers health care IT software, was down a fraction Thursday morning. This is IBM Watson Health’s fourth big health care IT purchase since IBM created that business last April, bringing total employment in the unit to about 5,000. That’s about a fourth of Cerner’s employment, after it acquired Siemens Health last February.  In October, IBM completed the $1 billion acquisition of Merge Healthcare, a clinical image processing and interoperability-systems specialist. Including Truven, IBM will have invested more than $4 billion to build Watson Health, a business that IBM says is “intended to help professionals improve health outcomes, control costs, and advance value-based care solutions.” Encouraged by lawmakers, software developers and mountains of new regulations, health care IT has been moving into a “value-based care” model that measures outcomes — and rewards hospitals and medical practices for good outcomes, while pushing doctors out of paper-based systems. Hospital IT budgets are expected to rise about 8% in 2016, up from 6% to 7% growth in 2015, though Cerner closed 2015 with 30% revenue growth, due largely to its Siemens acquisition. Based in Ann Arbor, Mich., Truven was sold by Thomson Reuters ( TRI ) in June 2012 to Veritas Capital for $1.25 billion. In the press release, Truven CEO Mike Boswood said the merger “will help catapult the industry forward to transform health care and to save and improve lives.”

Cerner Q1 Guidance Flops, New Bookings Flatten, But Q4 EPS Beat

Cerner, the nation’s large pure-play developer of health care information technology software, late Tuesday did a belly-flop with its Q1 EPS guidance, sending shares sharply lower after hours, though it blew its Q4 earnings out the water. Cerner ( CERN ) forecast first-quarter earnings per share minus items of 52 to 54 cents on sales of $1.15 billion to $1.2 billion, both metrics up 18% from the year-ago quarter at their midpoints. Analysts polled by Thomson Reuters were expecting 54 cents on $1.178 billion.  In either case, the performance would represent slowing growth. In the year-ago Q1, Cerner grew adjusted EPS 22% and sales 27%. The North Kansas City, Mo.-based company said it expects Q1 new-business bookings of $1.15 billion to $1.25 billion, the midpoint flat with Q1 2015,  which had risen 32% from Q1 2014. Cerner is facing single-digit hospital IT spending growth of about 8%, up from 6% to 7% in 2015,   as clinicians struggle to keep up with software innovation. Federal rule makers are requiring more health care technology updates while changing the game, complicating buying decisions. For its Q4 ended Jan. 2, Cerner said EPS rose 30% to 61 cents per share minus items, while revenue rose 27% to $1.175 billion. Revenue met analyst views, while EPS beat by 4 cents. Cerner stock was down more than 13% in after-hours trading, after the company released its Q4 results. Cerner stock rose 1% to 55.46 in the stock market today , 26% off its all-time high of 75.72 set April 13. Smaller rival Athenahealth ( ATHN )  rose 7.7% Tuesday but was down more than 1% after hours. Rivals Allscsripts ( MDRX ) and Quality Systems ( QSII ) were flat in after-hours trading. Cerner said its Q4 bookings rose 16% to $1.35 billion. “Our fourth-quarter results reflect a solid finish to a record year,” Cerner President Zane Burke said in the earnings release. “In 2015, we added more than double the number of new EHR (electronic health records) clients than any year in our history, including both large health systems and small hospitals. We also continued to advance our cloud-based HealtheIntent platform and had a very strong year of selling our population health solutions both inside and outside our EHR installed base.” For this year, Cerner forecasts EPS ex items of $2.30 to $2.40, on revenue of $4.9 billion to $5.1 billion. Wall Street had modeled, $2.36 EPS minus items on $5.02 billion in revenue.    

Cognizant ‘Throws Gas’ On Fire Burning Software Stocks

A big outsourcing company with a broad landscape, Cognizant Technology Solutions ( CTSH ) threw “gas on a bonfire” burning software stocks by warning of weakness in information technology for the banking and health care industries, said investment bank Evercore ISI. “Cognizant specifically highlighted a weakened demand environment in the financial services and health care sectors as key drivers behind disappointing” Q1 and 2016 guidance, Evercore ISI analyst Kirk Materne wrote in a research note Tuesday. Cognizant on Monday posted Q4 earnings that beat analysts, but it disappointed investors with guidance below Wall Street estimates, sending Cognizant stock down 7.7% Monday. And Cognizant stock was down another 3.3% in midday trading in the stock market today , at a 13-month low near 52. IT business process outsourcing (BPO) rivals  Infosys ( INFY ) and Accenture ( ACN ) were each down about 2% midday Tuesday. And IBM ( IBM ) stock was down more than 1.5% Tuesday. Its new IBM Watson Health is geared specifically to getting hospitals and medical practices migrating toward better electronic health records. Health care software vendor  Athenahealth ( ATHN ), which has been struggling near seven-month lows, was down 1%. “Rising medical costs, consumerization of health care and a changing regulatory environment, among other things, are driving industry consolidation in the payer industry,” said Cognizant President Gordon Coburn in the company’s earnings conference call with analysts. “We’re seeing some slowdown in our health care practice due to this consolidation, particularly in the early part of this year, as reflected in our Q1 guidance. “That said, we remain optimistic about the long-term opportunities within the payer segment and are quite encouraged by the large deal pipeline in this area for 2016. As the health care industry shifts from fee-for-service to value-based care models, health care organizations are simultaneously looking for new ways to deliver consumer-centric care while driving operational efficiencies.”