Allscripts slips after extended climb on 2Q earns

Shares of Allscripts Healthcare Solutions Inc. wavered Tuesday, ending a four-day surge as Wall Street applauded the clinical software provider's second-quarter results.

Allscripts reported profit and revenue than surpassed expectations for the quarter, with more orders filled for its TouchWorks v.11 software, and bookings for future quarters increasing. The shares have jumped nearly 30 percent over the last four trading days.

Analysts described the results as a relief to Wall Street after several weak quarters from the Chicago company, along with months of concerns about bookings for TouchWorks and concerns about interest in electronic health records.

"My view is, it's just kind of a relief that 'hey, things are fine,'" said Needham and Co. analyst Richard Davis of the earnings and investors' reaction. He added that 2007 was a difficult year for Allscripts: the rally helped reverse a steep decline: the stock sank from an annual high of $28.08 in late September 2007 to a low of $8.67 in March.

In a telephone interview, Davis said investors have been disappointed that physicians have not been enthusiastically adopting electronic health records (EHR) software. But he feels expectations have become more realistic and are better reflected in the current share price.

EHR "has been kind of holy grail of healthcare IT," he said. "Everyone thinks if they could just get doctors to switch over to EHRs then everything will go electronic. The switch has gone well, but the adoption has been nowhere near as fast as the big bulls would have said," he added.

That is because physicians don't benefit all that much from electronic records, Davis said. Insurance companies would benefit from greater use of EHR, but physicians aren't motivated to spend the money for an electronic system that will benefit the insurance company more than it helps their own practice.

That isn't Allscripts' fault, he said, and the company's records software is one of the best in the business.

British software company Misys PLC bought a majority stake in Allscripts in March, and that deal is expected to close later this year. Jefferies analyst Richard Close added that investors were concerned that Allscripts' customers would scale back their orders, waiting to learn more about the combined Allscripts-Misys Healthcare Solutions Inc.

"It's definitely encouraging to see that did not take place," he said. He believes Allscripts will have a major opportunity after the deal closes, as it will be able to market it products to Misys' customer base.

Allscripts shares rose 2 cents to $15.71 Tuesday.