WebMD Founders Step Aside

Jim Clark, the billionaire Silicon Valley visionary who dreamed of a
software company that would forge connections among just about everybody in
health care, resigned yesterday from the board of the firm he helped
create, WebMD. Martin J. Wygod, whose dreams are more concerned with
profits, took full control as the surviving chief executive of the troubled
company.

Jeff Arnold, an Atlanta marketing executive who founded WebMD and merged it
with Mr. Clark's creation, Healtheon, resigned as co-chief executive.

Mr. Wygod said in an interview that WebMD, which has been losing more than
$80 million every three months, would break even by the fourth quarter of
next year. He said he planned to strip the company of units that lose money.

"Over the next three months, we will renegotiate a dozen different
strategic alliances that don't make sense in their current form," Mr. Wygod
said.

"We will eliminate and write off any acquisitions that are losing a lot of
money or don't work for us strategically."

Skeptical investors, who had heard promises of eventual profits from the
former management team, drove WebMD stock down $1.19, to a 52- week low of
$8.50 yesterday. The stock, which was issued at $8 a share in February
1999, climbed as high as $105 three months later.

In addition to being hurt by investor skepticism about profitability, WedMD
stock was weakened by investor concern about rapid sales of large numbers
of shares by people who had sold companies to WebMD for stock, Cydney
Kislin, a health care analyst at Tucker Anthony Capital Markets, said.
Former executives, including Mr. Clark and Mr. Arnold, also own large
blocks of stock they could sell soon. Mr. Clark, for example, has about 3
percent of WebMD stock, worth $102 million at yesterday's price.

Earlier this year, Mr. Clark, who had founded two successful Silicon Valley
companies, Silicon Graphics and Netscape, said he planned to invest an
additional $200 million in the company, but that did not happen, company
executives said.

Mr. Clark said in a written statement that he had "confidence in the
direction of the leadership of C.E.O. Marty Wygod and his management team."
He added, "At this time, I need to turn my attention to the three private
companies in which I am very actively involved."

Those companies are DNA Sciences, which is trying to develop medical
diagnostic tools and treatments using genetic screening; Shutterfly, which
lets consumers store photos electronically; and myCFO Inc., which helps
wealthy people manage their money.

WebMD officials said they did not know what Mr. Arnold planned to do.
Analysts, however, said they did not expect him to be idle for long. They
noted that Mr. Arnold, 30 years old, bought or struck alliances with more
than 80 companies over 18 months in building up WebMD. "Jeff is a serial
entrepreneur," said Dr. Bruce Hochstadt, an analyst in San Francisco with
Thomas Weisel Partners, a merchant bank. "I would not be surprised if he
resurfaced in a few months."

Analysts said Mr. Wygod, 60, and his team of experienced health care
executives were on the right track. "They are doing the right things to
clean up what's been a hodgepodge of different parts," Dr. Hochstadt said.

Ms. Kislin said WebMD now had "the right management to really execute the
strategy."

Marvin Rich, who was hired as president earlier this year, is a turnaround
expert. He recently helped Dr. Norman Payson apply financial first aid to
Oxford Health Plans in the New York area. In the early 1990's, he was
executive vice president for finance and information services at Wellpoint
Health Networks, based in California. Mr. Rich is surrounded by veterans of
Mr. Wygod's successful earlier companies, including Medco, a managed care
drug distributor that he sold to Merck & Company for $6.6 billion in 1993.

Larry Feinberg, a managing partner in the Oracle health care investment
fund, said another strong executive who will remain at WebMD is its
chairman, Mike Long, a Clark associate who formerly ran Continuum, a
financial software firm.

Mr. Wygod said the corporate headquarters would be moved to the New
York-New Jersey area from Atlanta. One of Mr. Wygod's offices is in Elmwood
Park, N.J. He also said he planned to eliminate $260 million in annual
expenses "in the first round" and a total of $350 million to $400 million a
year by the end of next year.

He said he intended to integrate the company's Envoy unit, a widely used
electronic system for sending and paying medical bills, and WebMd's Medical
Manager software, which helps doctors organize their offices. He said his
goal was to give doctors instant information about the insurance status of
patients (and later their medical histories) on a hand-held computer.

WebMD also plans to offer a conduit for transactions between insurance
companies and other payers on one hand, and doctors, hospitals and
health-plan members on the other. WebMD would provide behind-the- scenes
software links for World Wide Web sites sponsored by the companies and
providers. It would collect a small fee on each transaction.

The competition includes big insurers who are creating their own
proprietary systems and Medunite, a coalition of six large health-care
companies that is trying to create similar electronic links. Mr. Wygod said
WebMD could offer savings to payers and providers, building on its existing
services.

Most hospitals have switched to electronic networks to handle their
billing, but most physicians' offices still depend on paper forms, Dr.
Hochstadt said.


By MILT FREUDENHEIM
Copyright 2000 The New York Times Company
http://www.nytimes.com/2000/10/13/technology/13HEAL.html

janet paterson
53 now / 44 dx cd / 43 onset cd / 41 dx pd / 37 onset pd
TEL: 613 256 8340 URL: http://www.geocities.com/janet313/
EMAIL: [log in to unmask] SMAIL: PO Box 171 Almonte Ontario K0A 1A0 Canada