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