Cerner has struck a settlement agreement with one of its customers which will force the giant IT vendor to take significant charge against its fourth-quarter earnings.
The client, Trinity Medical Center of Minot, N.D., claimed last year that the patient accounting software sold by Cerner in 2008 was defective and didn’t deliver on the promised business benefits.
In the suit, the medical center asked for $240 million in damages, while Cerner only estimated damages of $4 million. To settle the matter, the two parties agreed to go into arbitration, according to a report in the Wall Street Journal.
While the amount of the settlement was not disclosed in court filings, Cerner clearly got its clock cleaned. The vendor issued a statement saying that it “strongly disagreed” with the amount the hospital was awarded.
As a result of the arbitration settlement, Cerner will take a charge of $0.18 to $0.19 per share for the quarter ending Dec. 23, 2013. Clearly, Cerner came out on the wrong side of the deal, and then some. And it’s not used to losing. The vendor’s statement also noted that this settlement was “the only material judgment against Cerner in its 34-year history.”
While both Cerner and Wall Street will get over this matter, it’s still something of a landmark in the IT vendor business. Most of the time, IT vendor contracts have customers so tied up in knots that they can’t even speak about their experiences with the product, much less take the vendor to court for for poor product performance.