WebMD Corp.

founded: 1995

Contact Information:

headquarters: 669 river dr., center 2
elmwood park, nj 07407 phone: (201)703-3400 fax: (201)703-3401 toll free: (877)469-2163 url: http://www.webmd.com

OVERVIEW

WebMD Corp. is best known for its popular Internet site of the same name, but providing online health care information to consumers is only a small piece of the business. The company was founded in 1995 and has grown rapidly, largely due to mergers and acquisitions. It is now one of the largest companies specializing in electronic healthcare solutions and technology services. WebMD operates in three distinct sectors: transaction services, medical practice management systems, and Internet content for health-related sites.

COMPANY FINANCES

In 2001 WebMD Corp. posted $6,684.3 million in losses on $706.6 million in revenues. This was the result of losses from continuing operations and one-time charges associated with restructuring. These numbers are somewhat worse than the 2000 fiscal year that saw the company post a nearly $3.1 billion loss on $517.2 million in revenues. The company was seriously impacted by the dot-com collapse in the year 2000, and the most recent financial statements reflect these events.

ANALYSTS' OPINIONS

In 1999 WebMD was one of the top ranked Internet stocks on the market, trading at an eye popping $126 per share. In 2000, when Internet stocks tumbled, WebMD had a long way to fall. It bottomed out at $3.22 a share. Since that time the company has begun a major reorganization effort. Company officials are claiming that they will be able to show positive operating income before the end of 2002. Analysts are taking a "wait and see" attitude with the health care company. David Risinger, an analyst at Merrill Lynch looked at the company in early 2002 and described its rebuilding efforts as "herculean." Michael J. Barrett, a health care analyst with Forrester Research, said about the company, "Without question, WebMD is the leading health care consumer portal." Analysts and physicians alike will need more evidence that the company can deliver its products, and do it profitably, before they endorse it.

HISTORY

WebMD (formerly Healthscape) is a conglomerate of numerous healthcare companies formed through a series of corporate actions. The origins of the company can be traced back to 1995 when Healthscape was founded. The three founding partners each specialized in either medicine or information technology. Jim Clark came to the venture as the founder of both Netscape and Silicon Graphics. Pavan Nigam was an executive at Silicon Graphics and came with Clark. David Schnell was a medical doctor with a degree from Harvard Medical School. He was formerly a partner in biotech company Kleiner Perkins. Together the three men represented the union of medicine and technology. Not long after the launch of the company, the name was changed to Healtheon to avoid confusion with another firm using the name Healthscape in its title.

Healthscape attempted to streamline the cumbersome enrollment process required by most health care plans by offering online enrollment services that could be customized to meet differing needs of employers. While this appeared to be a sound business premise, it never gained popularity and, by 1997, the business was in decline. The founders made the decision to shift the company's focus to electronic transactions and data exchange protocols. David Schnell departed in 1997 to become a partner in a venture capital firm and a new CEO was hired. Michael Long was a seasoned executive from the world of technology and brought the expertise required to manage Healtheon's transition to a high-end medical technology outfit. Beginning in 1998 the company initiated a string of acquisitions that would continue for several years. One of the first purchases was ActaMed, an electronic data company.

The partners believed that the company was once again on the path to profitability and announced plans to make a public stock offering. Market conditions deteriorated, and the IPO was postponed. Instead, the company was able to secure the necessary financing from private venture capitalists. The following year would prove to be a pivotal year in the short history of the company. Cashing in on the Internet phenomenon, Healtheon realized its goal of becoming a publicly traded corporation. The initial stock offering netted more than $40 million and provided the resources to continue the company's expansion plans. It was in 1998 that Healthscape merged with the first company to bear the name of WebMD. This company was founded in 1996 by Jeffrey Arnold, a pharmaceutical salesman turned Internet entrepreneur. The new entity was renamed Healtheon/WebMD and Arnold assumed the title of CEO for both firms.

The next several years would be marked by a series of acquisitions and agreements designed to establish superiority in each of the areas of operations. The electronic transaction division continued to grow with the addition of several firms including MEDE America and ENVOY, the medical transaction unit of Quintiles Transnational, and Kinetra, a joint venture of EDS and Eli Lilly. The latter two deals cost the company more than $1 billion in fees. The Internet portal business was also the beneficiary of noteworthy partnership deals. Healtheon/WebMD initiated an arrangement to receive medical news from the Greenberg News Networks and worked with News Corporation to license information and take advantage of the branding services afforded by the larger media company. To complete the string of corporate actions, Medical Manager and its subsidiary, Carelnsite were purchased to strengthen the physician management software division. This last transaction cost the company billions of dollars but increased its overall presence among physicians and within medical practices.

In September 2000 this new conglomerate shortened its name to WebMD Corp. Although the company name was smaller, operations had become unwieldy. The changes to the organizational structure had happened rapidly and without a plan for maximizing efficiency or managing integration. Management was forced to begin the difficult task of restructuring the organization in an effort to stem escalating costs of operations and the resulting loss of revenues. Efforts to streamline operations did not come without a price. By the end of fiscal year 2000, the company had accrued $452.9 million dollars in charges related to the reorganization, including expenses such as moving and relocation fees, severance packages for terminated employees, and penalties assessed for marketing or licensing agreements that were cancelled.

Three prominent partnerships were redefined during this time in accordance with WebMD's newly created strategic plan. A contract with News Corporation Limited, which called for the parties to exchange media services and Internet content, was trimmed. Plans for several future joint ventures, including a cable health network, were tabled. An agreement with E.I. du Pont de Nemours was suspended completely, but a future joint venture in the area of food and nutrition remained a possibility. WebMD's relationship with software giant Microsoft was also revised to better meet the needs of the revamped conglomerate. A series of new joint ventures with Microsoft were outlined and scheduled in conjunction with new product developments at both firms. Numerous other deals with other smaller vendors were also revisited, all with the end goal of making WebMD a leaner and more efficient corporation.

The year 2000 also marked significant personnel changes for the medical technology firm. Amidst the many operational changes, key company officials departed. Pavan Nigam, Jeffrey Arnold, and Jim Clark, who was now serving as a member of the board of directors, left the company they had created. In early 2001, CEO Mike Long also ended his tenure with the organization and was replaced at the helm by Martin Wygood. In the first eighteen months at the controls, Wygood and company closed some of the unprofitable divisions and repurchased more than 77 million shares of WebMD stock. At the close of 2001, the company purchased the main business unit of its largest competitor, MedicaLogic/Medascape for only $10 million. This acquisition gave WebMD a virtual monopoly in the area of online healthcare. Ability to generate revenues will pose the greatest challenge to future financial health of the company.

FAST FACTS: About WebMD Corp.

Ownership: WebMD Corp. is a publicly traded company on the NASDAQ Stock Exchange.

Ticker Symbol: HLTH

Officers: Martin J. Wygood, Chmn. and CEO, 61; Thomas P. Apker, COO, 45; Kevin Cameron, EVP, 34

Employees: 4,700

Chief Competitors: WebMD Corp. is a healthcare information and technology company that provides online medical content to consumers and business solutions for medical practice management. Its primary competitors are online service providers and electronic transaction firms such as America Online, Health Management Systems, iVillage, and EDS.

STRATEGY

Following the consolidation of new business units, WebMD planned to move forward with a slate of strategic initiatives designed to position the company as a leader in its field. Improving connectivity, increasing the frequency of electronic transactions, and more rapid processing of transactions (timeliness) are constant priorities. Specific initiatives that the company plans to implement include: the introduction of handheld devices for physicians, strengthening relationships with pharmaceutical companies, marketing a single solution for claims processing, and using the Internet portal to expand the company's customer base.

INFLUENCES

The Internet and wireless markets impact significantly on company operations. Despite the collapse of many companies in the technology sector, WebMD is still focused on expanding and improving its services utilizing technology. Strategic partnerships will be evaluated for compatibility with the company's overall goal of becoming a leader in selected markets. Moving forward, the company plans to pay special attention to the level of acceptance of technology by its users and target markets.

CURRENT TRENDS

WebMD is positioning itself to be dominant in wireless and handheld devices for medical management and physician practices. However this roll out must not occur without first achieving a high level of interest from the medical community. The creation of advanced technologies such as electronic prescription writing capabilities are worthless if physicians prefer to use a pad and pen.

As an online health care information provider for consumers, WebMD faces the same challenges as any Internet service provider. It must find new methods of generating revenues while providing free information to users. The company plans to develop sponsorship opportunities, fee based services, and increase revenues from advertising.

PRODUCTS

WebMD is an online health care information and technology company. The company provides transaction services for physicians, pharmacies, insurance companies, hospitals, billing services, state and federal agencies, and other participants in the healthcare profession. Virtually every application involved in the practice of medicine can be automated and conducted electronically: lab ordering, prescription writing, tracking of medical and x-ray charts, billing, and insurance verification. WebMD provides online information for consumers. Physician search tools, diet and fitness journals, calorie counters, online management of family health records, and e-mail newsletters are only a handful of the tools available to users of the site.

DOOGIE HOWSER, MD

The notion of a teenage Marcus Welby was once the subject of a popular television series starring Neil Patrick Harris as the young physician. Each episode ended with Doogie typing his thoughts into his computer journal. Teenagers today aren't becoming doctors, but they are flocking to their computers to find answers to their most personal questions. Thousands of teenagers surf the Internet to gather information and articles about issues they are reluctant to discuss with their parents. The topics include general, sexual, and emotional health issues. Sites like WebMD are popular with adults, but teenagers are visiting sites especially designed for them. Some popular options include: www.teengrowth.com, www.kidshealth.com, www.iemily.com, and www.zaphealth.com.

CHRONOLOGY: Key Dates for WebMD Corp.

1995:

Healthscape is founded, but soon changes its name to Healtheon

1997:

Company changes strategic direction as online enrollment does not gain popularity

1999:

Healtheon becomes a publicly traded company; Healtheon merges with WebMD and the new company eventually adopts the WebMD name

2000:

WebMD begins a major rebuilding effort in the wake of dot-com collapse

CORPORATE CITIZENSHIP

WebMD believes in supporting community and charity events. It is particularly inclined to donate time or services to medical causes and research. The company co-sponsored a large charity event to benefit the Elton John AIDS Foundation. A star-studded tennis tournament held in Atlanta featured appearances by Andre Agassi and Pete Sampras and was presented by WebMD and Dupont. WebMD welcomes opportunities to participate in fundraising events.

GLOBAL PRESENCE

WebMD is accessible to Internet users worldwide, but operations are largely conducted in the United States. Company operations are designed to serve medical practices, insurance providers, and consumers who are a part of the U.S. medical system and subject to its insurance practices and regulations. At this time, international markets are not a primary consideration.

BEAM ME UP!

Crew members on the popular television series Star Trek Voyager needed to only push a button or issue a voice command and the perfect doctor materialized before their eyes uttering his pre-programmed line, "Please state the nature of the medical emergency." Not the best bedside manner, but not bad for a hologram. Star Trek technology like that doesn't really exist, but companies like WebMD are hoping to make it a reality. E-health companies are all in search of the "killer app" that will revolution doctor's office visits and generate huge streams of revenues for its inventor. Before the "killer application" can rock the medical community, doctors need to agree on what they need. Online health companies collapsed in 2000 because physicians were not enticed to enter the world of e-mail and browsers to conduct business with the expensive tools that were developed. Many doctors claim to be computer illiterate or simply can't type. This was a valuable lesson for future product development. The search for the ultimate solution is still a work in progress.

EMPLOYMENT

WebMD employs about 4,700 employees and 180 independent contractors. In the year 2000, the company terminated more than 1,000 employees as part of the restructuring effort. In 2002 the company recruited employees to strengthen its new organization. The company looks for individuals who are highly trained, innovative, and creative. The self-described corporate culture is a "casual work environment, but very serious about business". WebMD offers a competitive benefits package that includes education assistance, adoption assistance, and medical and dental insurance.

SOURCES OF INFORMATION

Bibliography

chin, tyler. "in search of the killer app that will bring physicians online." amednews.com, 9 october 2000.

elton john aids foundation/press release, 23 august 2000.

hoovers company profiles, 2002. available at http://www.hoovers.com.

rothman morris, bonnie. "teenagers find health answers with a click." the new york times, 20 march 2001.

For an annual report:

on the internet at: http://www.webmd.com/corporate

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. webmd corp.'s primary sic is:

7372 prepackaged software

also investigate companies by their north american industry classification system codes, also known as naics codes. webmd corp.'s primary naics codes are:

511210 software publishing

514191 online information services