IMS Struggles to Regain Trust After Failed Deal
Gaining the confidence of Wall Street can be hard for a company. But regaining the Street's confidence after losing it can be even harder.</br></br>Take health-care information provider IMS Health. It delivers information on drug sales and trends to pharmaceutical giants, with an amazing 93% market share. But some investors and analysts are reluctant to give the company a clean bill of health because of management-credibility issues.</br></br>Concerns stem from the odd reverse merger IMS announced this past March with TriZetto, a three-year-old Internet health-care concern with a mere $33 million in annual revenue. Investors couldn't grasp why the venerable information provider -- with $1.4 billion in annual revenue last year -- was looking to merge with the newly public company, which offers medical billing and administrative software online. Amid the pummeling of both companies' shares, the deal was subsequently scratched, although IMS ended up selling a unit to TriZetto.</br></br>The company's shares have been given a 5% "management discount" by Credit Suisse First Boston analyst Stephen DeNelsky. He has prepared an interactive stock-valuation spreadsheet for investors in which they choose how much of a discount they want to apply. "It's the risk that when you walk in one morning and boot up your machine that there is another news item with something like the TriZetto deal," Mr. DeNelsky says of the discount.</br></br>For their part, IMS's top executives continue to defend the deal, believing it would help IMS to expand its Internet strategy. "From a strategic point of view, it was a good transaction; from a timing point of view, we couldn't have picked a worst time because we did announce it simultaneous with the collapse of the technology market," Robert E. Weissman, the company's chairman, says in an interview, referring to the spring collapse in tech shares. "We were not tone deaf in spite of the fact that we did not need shareholder approval. We listened and we modified the transaction."