USA Mobility jumping from pagers to smartphones, tablets with acquisition of Amcom

By Steven Overly
Capital Business Staff Writer
Monday, March 14, 2011

Springfield-based USA Mobility saw its subscribers dwindle from 6 million in 2004 to 1.9 million at the end of last year as the expansion of text messaging and smartphone use continued to rattle its paging business. In many ways, it was a living relic of a bygone era in telecommunications.

"The paging industry hit its high-water mark in terms of subscribers in about 1999. Since then, it's been eroding pretty rapidly," said chief executive Vince Kelly. "So much of our customer base migrated away from pagers to mobile telephony . . . and everyone sort of wrote off pagers."

Health care serves as the company's strongest remaining market, with hospitals continuing to use the hip-affixed devices to ping doctors. That segment may now play a critical role in the company's next incarnation as it proceeds with plans to acquire communications integrator Amcom Software of Eden Prairie, Minn.

If USA Mobility represents a declining mode of communication, Amcom would probably be its antithesis. As smartphones and tablet devices become more common tools for health-care professionals, Amcom helps hospitals merge multiple devices into a single communication network.

The use of mobile devices in the health industry is not ubiquitous yet, but researchers who track the sector say it is trending that direction. The government's push for hospitals to use electronic records - while also reducing the cost of care - has expedited the adoption of newer technology.

"The hospital administrators, especially at large group practices, already realize if you put a smart tool in physicians' hands they can use the device to the point where their productivity can be improved and doctor and patient communication can be strengthened," said Harry Wang, director of health and mobile product research at the Dallas research firm Parks Associates.

At their popularity peak in the late 1990s, more than 40 million devices were in use, Kelly said. For the average consumer, they were the first foray into an always-connected society, before mobile phones became affordable.

Kelly said his health-care clients continue to use the devices because they can push short, rapid-fire messages across a network that's often more reliable than cellular service. Essentially, they have only one central function but they consistently deliver.

But consumers and professionals demand more of their devices today, including data-intensive functions such as video and Internet. And those devices come with different operating systems and networks, creating a challenge for large organizations that have to coordinate often-critical communication across many different platforms.

"Right now the majority of physicians own their own devices, and there's multiple types of devices, and the device life cycle is quicker than what you see for an enterprise, so I can imagine institutions are looking to integrate these systems," said Monique Levy, the vice president of research at Manhattan Research.

USA Mobility has hedged its bets on that trend. The deal with Amcom was priced at $163 million, and Kelly said the software company can be easily blended into USA's business. Health care makes up 66 percent of Amcom's business, and both companies also have overlapping market segments in government and large organizations. In fact, USA Mobility lost a prospective client to Amcom before the deal, Kelly said.

USA Mobility posted a profit of $77.9 million for 2010, an increase of 15 percent over 2009, despite a decline in revenue. The company has been able to cut costs by reducing infrastructure as its customer base falls, Kelly said.

"It's transformative [for us] in way because it's a growing business - unlike paging, which has been a shrinking business," Kelly said. "It's a good space to be in. It's where there's going to be a lot of focus in the future. There's going to be a focus on health-care institutions being cost efficient, and we think we can help in that."

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