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Varian to Acquire Velocity Medical SW

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Calif.-based medical instruments maker Varian Medical Systems (VAR - Free Report) entered an agreement to acquire the Velocity software from Atlanta-based Velocity Medical Solutions, LLC. However, the news failed to entice investors as stock price stayed almost the same (just a 0.1% slide) since the announcement.

The Velocity software is designed to help clinicians making informed decisions for treating their patients by presenting a comprehensive view of a patient’s diagnostic imaging and treatment history, regardless of their previous location of treatment or previous technology used for the treatment. The software is capable of accessing and aggregating unstructured treatment and imaging data from diverse systems.

The privately-held Velocity Medical Solutions was founded by some eminent clinicians in order to transform unstructured data into meaningful clinical knowledge. The Velocity software has already been used at over 200 cancer treatment centers globally.

Post-acquisition, Varian expects its global sales, service and support network will lead to better market penetration for the Velocity software. The company intends to develop this oncology software platform with the Velocity team in Atlanta, GA. The acquisition is expected to close in the fiscal third quarter.

VAR posted a 5.8% rise in net earnings per share to 91 cents for the first quarter of fiscal 2014 from 86 cents in the prior fiscal quarter, and edged past the Zacks Consensus Estimate by a penny. With this, VAR also met its own guidance of a 6–7% rise in earnings per share to 87–91 cents for the quarter.

Revenues in the quarter escalated nearly 5.0% to $711.5 million during the quarter, but lagged the Zacks Consensus Estimate of $718 million. The growth was attributable to the continued strong demand for Oncology services and X-ray imaging components during the quarter.  

For fiscal 2014, VAR expects revenues to grow by 6–8% compared with the earlier guidance of 6–7%. However, the company reiterated its earnings per share guidance between $4.22 and $4.34 for the year. The current Zacks Consensus Estimate of $4.29 lies within the guided range.

For the second quarter of fiscal 2014, VAR expects revenues to be flat on a year-over-year basis. However, it expects earnings per share for the quarter in the range of $1.00 to $1.04. The current Zacks Consensus Estimate of $1.02 lies within the guided range.

Currently, VAR carries a Zacks Rank #3 (Hold). Some better-ranked medical instrument stocks that currently worth a look include Cynosure Inc. , Syneron Medical Ltd. , and DexCom, Inc. (DXCM - Free Report) . Both Cynosure and Syneron Medical sport a Zacks Rank #1 (Strong Buy), while DexCom carries a Zacks Rank #2 (Buy).

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