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Sonata in talks to buy healthcare portal

Feb 25, 2000

Sonata Software is in negotiations to acquire the US-based Health Systems Designs, which operates a healthcare portal. The company trades in products for Microsoft, Oracle, SCO, Lotus, IBM and Computer Associates apart from earning revenues from software services, ERP business solutions around Scala. Sonata’s software services range from maintenance, migration, conversion, re–engineering services to full scale cycle software development, e–commerce applications and ERP customisation projects.

The acquisition of a portal would in a way signify a forward integration since the company is into the designing of portals too.

However, the fact remains that the valuation at which the company acquires the portal (given the high valuations that dot.com companies command) is a critical factor in the future. (The newspaper reports put the valuation at $ 50 million i.e. Rs 2 bn.) Besides, how the company funds the acquisition (whether through a stock swap or in cash) is also likely to be equally critical.

Another fact to bear in mind that analysts the world over are getting restless at the continuing losses of the dot.com companies and one is, at present, not aware of the business model of the portal as well as its sustainability.

Market View:
The stock has had an impressive run up over the last twelve months in line with the rally in software stocks and market analysts have rated it as a ‘hold’ over concerns for a possible downward re–rating for the sector as a whole.

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