SecProbe.io

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Mail Stop 4-6

      December 18, 2004

Charles A. Jett, Jr.
Chief Executive Officer and Chairman of the Board
Emageon Inc.
1200 Corporate Drive, Suite 200
Birmingham, Alabama 35242

Re:  	Emageon, Inc.
	Form S-1 filed November 19, 2004
	File No. 333-120621

Dear Mr. Jett:

    We have reviewed your Form S-1 and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments.  If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary.  Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.

    Please understand that the purpose of our review process is to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We welcome any questions you may have about our comments or on any
other aspect of our review and look forward to working with you.
Feel free to call us at the telephone numbers listed at the end of
this letter.
General
1. We will process your amendments with price ranges. Since the
price
range triggers a number of disclosure matters, we will need
sufficient time to process the amendment when it is included.
Please
understand that its effect on disclosure throughout the document
may
cause us to raise issues on areas not previously commented upon.

2. We will provide you with comments on your application for
confidential treatment of the Enterprise Agreement with Ascension
Health under separate cover.

Inside Front Cover
3. You describe and depict your software capabilities on both the
inside front cover as well as the outside back cover pages of the
prospectus.  Please supplementally furnish us copies of these
pages,
since the text on the representative x-rays, CTs, MRIs, etc. is
illegible.  Information on the inside front cover page should
comply
with the guidance on graphics that we provided in Section VIII of
our
March 31, 2001 update to our Corporation Finance Current Issues
Outline. Graphics must be clear illustrations of your product,
while
any descriptive language must be concise and free of industry
jargon.
Information following table of contents

4. Between the cover page and the prospectus summary you may only
present information that may be provided on the inside front cover
under Item 502 of Regulation S-K.  While you may retain the
prospectus delivery legend on the inside cover page, please move
the
Industry Data paragraph from the inside front cover page to an
appropriate section of the prospectus so that it does not
interrupt
the flow of the information required by Rule 421(b).
5. We note your disclosure under Industry Data in which you state
that the estimates that you have included were prepared using data
from various sources using assumptions and your knowledge of the
markets.  You go on to state that: while you take responsibility
for
compiling and extracting the data, you have not independently
verified the data; and any internal estimates have not been
verified
by any independent sources so you cannot assure their accuracy.
Please revise these two paragraphs to remove any implication that
potential investors cannot rely upon the data.  Industry data
receives fairly prominent discussion in your registration
statement,
such as in summary and business and potential investors should be
entitled to rely on data to the extent that it is used.

Summary
6. Revise the introductory paragraph to clarify that the summary
provides an overview of the material aspects of your offering.
See
Item 503(a) of Regulation S-K.
7. We note your reference to "industry data" regarding the number
of
imaging procedures and space requirements for such data as well as
to
such groups as Frost & Sullivan, Healthcare Financial Management
Association, IMV and the Standish Group in the business section.
Please provide us with marked copies of the articles containing
the
data you cite. Set forth the dates of all cited reports.  Tell us
whether the information you attribute to these sources is
generally
available to the public without charge or at a nominal cost and if
so, please tell us where the information is available.
8. Briefly explain Picture Archive and Communication Systems
(PACS)
and Digital Imaging and Communications in Medicine framework
(DICOM).
In your business section, please define Health Level 7. We note
your
discussion in business regarding these terms.

9. We note your list of representative customers in the summary
and
business sections. We presume that the companies listed are
current
customers.  Disclose the criteria you used in selecting the
customers
you identified by name. Is there a minimum dollar value of sales
you
made to the companies you list, for example?

Risk Factors
10. Many of your risk factors rely on generic conclusions
regarding
the impact the risks you cite may have on your business.  Many of
your headings contain identical language i.e., that the risk may
"adversely affect our business," "adversely affect our ability to
grow our business," "adversely affect our results of operations
and
financial condition," "have adverse financial consequences," or
"negatively affect our business."  Other risk factor headings fail
to
identify any risks. Please revise this language with specific
disclosure regarding the effect each risk cited may have on the
company or industry.
11. We note your risk factor discussion on dependency on highly
specialized personnel, such as those in technical and sales
positions.  Would Mr. Gehring as Chief Technology Officer be
covered
by this disclosure? Consider adding a risk factor addressing your
reliance on executive management, such as Messrs. Jett, Silva-
Craig,
Pittman or Gartman. We note that you have filed employment
agreements
for all five of these executive officers.
12. Advise of the consideration given to adding risk factor
disclosure regarding your decision to move from term licenses to
perpetual licenses.  Won`t this decision affect revenue
predictability?
13. We note your brief discussion on page 8 regarding the growth
in
your contracted backlog, which at the nine-month period ended
September 30, 2004 stood at $117.6 million up from $63.5 million
for
the nine-month period ended September 30, 2003.  Advise of the
consideration given to separate risk factor disclosure regarding
your
contracted backlog. In this regard, it would be helpful to first
define the term (i.e., aggregate dollar value of unrecognized
revenue
from all executed contracts at a given point in time), what this
represents to Emageon, and whether there are any material risks
that
potential investors should consider.

The loss of one or more major customers could materially and
adversely affect . . . page 9
14. Please tailor the subheading so that it speaks specifically to
your present dependence on Ascension Health, which accounts for
35%
of your total revenues for the nine months ended September 30,
2004.
To the extent that you are currently dependent on customers other
than Ascension Health, they should be identified here and
discussed
in the business section and in MD&A as appropriate.

Changes in our third party reselling arrangements may affect our
revenues...page 9
15. Address your reliance on third-party components, including
whether you have any material agreements relating to such
components
with IBM, EMC Corporation and Eastman Kodak.  As part of this
discussion, address your statement on page 53 that you believe, in
most cases, there are alternative vendors from whom you could
obtain
any necessary licenses for software, hardware and the like. To the
extent that you have any material agreements, please advise of the
consideration given to the exhibit filing requirements of Item
601(b)(10) of Regulation S-K.

   If we fail to protect our intellectual property rights . . .
page
13.
16. You state that you rely on patent protections to protect your
proprietary technology and other intellectual property rights.
Revise the first sentence to clarify that you have filed patent
applications to protect aspects of your software technology but
that
no patents have been issued to date.

Use of Proceeds
17. You state on page 18 that, other than the $4 million to repay
borrowings, you expect to use the proceeds for "general corporate
purposes, including working capital, research and development,
sales
and marketing and capital expenditures."   It appears from the
rest
of your prospectus disclosure that an investor could reasonably
assume you have performed studies and made preliminary decisions
with
respect to the best use of capital resources.  For example, on
pages
3, 7, 28 and 33 you state that you expect to increase expenses
significantly in the areas of sales, marketing, and/or research
and
development and on page 8 that you may use a portion of the
proceeds
of this offering to expand your product offerings.

If you have made preliminary decisions about your future growth
potential and appropriate resource allocation, state the
approximate
amount to be used for each purpose and revise management`s
discussion
to provide a brief outline of these plans, including the likely
priority of, and contingencies affecting, such plans.

Management`s Discussion and Analysis of Financial Condition and
Results of Operations

Overview
18. Where you discuss backlog, revise to quantify the amount of
backlog you will recognize in periods beyond fiscal year 2005.

Critical Accounting Policies and Estimates

Revenue Recognition and Deferred Revenue
19. You state that you sell software under perpetual and term
licenses based on a fixed number of users and/or estimates of
annual
study volumes.  Confirm to us that in these arrangements the
license
fee is set at the execution of the contract and is not a function
of
the number of copies or volume ultimately delivered or used by the
customer.  See paragraphs 21 and 26 of SOP 97-2.
20. Describe in greater detail the types of specified upgrades
granted to customers.  Also, disclose how you establish VSOE for
those upgrades.
21. Supplementally explain why it is appropriate for you to record
revenue from the sale of third party components on a gross basis,
particularly in the circumstances where you are not responsible
for
installation.  Help us understand the arrangements you and your
customers have with your third party suppliers and explain why you
believe your revenue recognition is appropriate.  Address the
criteria in EITF 99-19 to support your accounting.
22. Disclose and supplementally provide us with a description of
any
guarantee associated with your products.
23. Expand your discussion of deferred revenue to discuss the
reasons
for the significant increase during the nine-months ended
September
30, 2003.  Quantify the deferred amounts associated with the
nature
of services to be performed (i.e., support services, up-front
services, implementation, etc.).

   Results in Operations
24. Part B of SEC Release 33-8350, Commission Guidance Regarding
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, states that the purpose of MD&A is to
provide
readers information necessary to an understanding of a company`s
financial condition, changes in financial condition and results of
operations.  The MD&A requirements are intended to satisfy three
principal objectives:

* to provide a narrative explanation of a company`s financial
statements that enables investors to see the company through the
eyes
of management;
* to enhance the overall financial disclosure and provide the
context
within which financial information should be analyzed; and
* to provide information about the quality of, and potential
variability of, a company`s earnings and cash flow, so that
investors
can ascertain the likelihood that past performance is indicative
of
future performance.

Revise your MD&A disclosures to avoid the mere recitation of the
financial statements in narrative form.  Although quantification
of
the changes in results of operations is important, MD&A should be
revised to place an emphasis on analysis of financial information.
That analysis should include information such as known material
trends and uncertainties, key performance indicators, including
non-
financial indicators; liquidity and capital resources, and
critical
accounting estimates.
25. In your discussion of the results of operations, you refer to
various factors that have impacted results without quantifying the
impact of each factor.  Revise to quantify the amount of change
that
was contributed by each of the factors that you have identified.
For
example, you disclose on page 32 that the increase in revenue was
attributable to an increase in the number and size of new customer
installations as well as more system installations being perpetual
licenses rather than term licenses.  Your disclosure should be
revised to quantify the change in the number and size of system
installations as well as the change in the mix between perpetual
and
term licenses.
26. Where you explain the reasons for the increase in revenues,
you
indicate a portion of the increase was attributable to a shift in
your sales from primarily term licenses to primarily perpetual
licenses.  Tell us supplementally and revise to clarify the
business
reasons for this shift in license arrangements.  Also, revise to
clarify how much of the increase in revenues is due to increase in
volume of licenses compared to prior periods.  Revise your
disclosures to clarify and quantify how much of the increase in
revenues is attributable to an increase in your business versus a
result of applying a different accounting model to a different
type
of license.
27. With respect to the mix between perpetual and term licenses,
your
discussion on page 26 indicates that in 2003 and the first three
quarters of 2004, the majority of your customers purchased
perpetual
licenses and that you expect this trend to continue. Here, or
elsewhere as appropriate, elaborate on this trend and what means
to
Emageon and potential investors, including the effect on
reliability
of future revenue.
28. We note your disclosure on page 33 of the aggressive sales
commission plans that were in place in prior periods and the
changes
to be more reflective of revenue recognized during the period.  We
further note your policy regarding sales commissions on page F-11
that indicates that you record the commission expense when the
liability is incurred regardless of whether you have recognized
the
associated revenues.  Help us understand how the change "to be
more
reflective of revenue recognized" is consistent with your stated
policy.   Supplementally describe to us your sales commission
plans,
both before and after the recent changes.  Supplementally explain
the
nature of the services your employees are being compensated for
and
the period in which they earn the commission.  Address whether
they
are required to perform services following the initial sale.
Please
advise and provide any additional information to help us
understand
your commission plan and your respective accounting.  Refer to the
accounting literature that supports your accounting.
29. Regarding your sales commission plans, expand your discussion
to
quantify the impact this change will have in future periods.  Such
a
change represents a known material trend that impacts both results
of
operations and cash flow.
30. Revise your disclosures to describe and quantify each material
source of revenue.  For example, revise your disclosures of
support
services revenue to quantify the amount of revenue generated from
up-
front services, such as implementation and user adoption and
ongoing
support services such as software and hardware mai