Healthcare Information Systems

DAOU Systems, Inc.

Products

DAOU Systems' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DAOU)") else Response.Write("(Nasdaq: DAOU)") end if %> network design services include assessment of the customer's existing computer network system, the preparation of voice, video and data network specifications, technical design documentation and diagrams. DAOU's implementation services include the purchase, delivery, and installation of enterprise-wide computer network systems.

In 1996, revenues from design services averaged approximately $49,000 per project, and revenues from enterprise-wide implementation service arrangements ranged from approximately $470,000 to $3.7 million per project. Revenues from other implementation projects averaged approximately $70,000. Implementation service revenues consist of third-party hardware and software products, as well as the company's professional services.

The Company

DAOU Systems went public on February 12, 1997. The company is a pure play networker performing in the healthcare space, a small company with a market cap of $238 million selling large ticket items with profit margins of around 6%. The fact that the typical hospital has installed scores of disparate systems plays to DAOU's strengths as a designer and manager of networks, offering solutions that more typical HIT companies cannot achieve. Since there are still healthcare competency barriers to other networkers getting in on the action, this helps DAOU's competitive position. Trading at 47x 1998 earnings estimates and almost 10x sales, DAOU has little room going forward.

Latest Financials

The company posted second-quarter and year-to-date revenue of $6 million and $11.2 million respectively, increases over the previous year of 15% and 49% respectively. Net income for the second quarter was $58,000, with a net loss for the year-to-date of $174,000.

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