A Medical Device Daily

Merge Technologies (d/b/a Merge Healthcare; Milwaukee), a medical imaging software and services company, reported that it is planning a substantial headcount reduction.

The company said it anticipates that its total worldwide headcount of about 600 employees will be reduced to about 440 people by March 31, a reduction of 160 personnel, including consultants. The company added that it expects a further estimated reduction from anticipated attrition during 2008 of about 20 people, net, for a total reduction of 180 persons.

The reduction includes 45 jobs in North America and Canada and about 115 positions offshore, including consultants, or 28% of its current workforce. The company said that most of the reductions are effective immediately, with a small number to be completed prior to March 31.

The company will recognize a charge in its financial statements for the first quarter ending March 31, 2008 of about $2 million, consisting of about $1.3 million in severance costs and about $700,000 in other costs including, primarily, legal fees and future lease payments on its Burlington, Massachusetts office, which it has completely vacated.

Merge said it estimates that annual cost savings of these actions will be about $7 million. It added that the aggregate estimated net reduction in the company’s annual recurring operating costs, including compensation, software development and customer support costs, and office lease costs is about $10 million per year plus an additional $1 million to $2 million of anticipated savings based on historical attrition.

“As we addressed earlier, the impacts of the Deficit Reduction Act, the two financial statement restatements, and ongoing legal expenses associated with litigation and the SEC investigation have been quite significant and have necessitated the recent rightsizing initiative,” said Ken Rardin, the company’s president/CEO. “We are making changes to our cost structure with the intention of enabling our company to focus on our core business and return to positive operating results.”