This was no time for a medical software seller--even WebMD Corp., which one stock analyst calls "this 800-pound e-health gorilla"--to have a cloud over its head.
And yet Atlanta-based WebMD welcomed the Medical Group Management Association conference last month to its headquarters city as a company shadowed by tumbling stock prices, executive departures and recent announcements that it was laying off 1,100 workers, slashing advertising and development costs, and not expecting to turn a profit until 2002.
It seemed appropriate that the two weeks of greatest discontent ended on Friday the 13th. WebMD stock closed the Friday before the conference at $8 a share, capping a fortnight in which the stock plunged from $15.25, setting or tying record lows five times.
The nose dive came during a broad market decline sparked by violence in the Middle East. But adding further to the angst was the Oct. 4 announcement that the Janus family of mutual funds had asked WebMD to file with the Securities and Exchange Commission documents needed for Janus to sell its $930 million stake in the company.
Following that came a meeting Oct. 12 between executives and stock analysts, who were told the company would likely remain unprofitable through 2001, though planned layoffs and other cuts may reduce projected losses.
The day had started with the announcement that WebMD founder and co-CEO Jeff Arnold had resigned. Also leaving was WebMD director and Netscape pioneer Jim Clark, who had bankrolled Healtheon, which merged with WebMD in late 1999.
Martin Wygod, the former chief executive at WebMD acquisition Medical Manager, and co-CEO with Arnold after the merger, was named the sole CEO. The stock rose briefly on the news, but tumbled again the next day when analysts' reports were released.
A contrarian, Credit Suisse First Boston, issued a buy recommendation the following Monday. The stock rose that day to $8.50, but the price remains a shadow of its $75 value in January.
WebMD is more than a practice software provider. In 1996, Clark founded Healtheon with the goal of cutting costs in the healthcare industry by using the Internet to facilitate transactions among doctors, insurers, hospitals and patients.
Providing the Web sites and the computerized practice management and medical records systems in the physician's office are key components of that strategy, however, and a battle rages among several dozen vendors of those systems for the hearts and checkbooks of physicians.
Analyst Kevin Berg of FAC/Equities of New York City, who used the gorilla metaphor in a recent report on the company, says he likes some of the advantages WebMD brings to the stiffening competition in the physician office systems market. WebMD has a built-in base of 125,000 physician subscribers, it owns Envoy, the largest medical claims processor, and, according to Berg, will hold nearly $900 million in cash by the end of the year, more than enough to carry it through to 2002 and targeted profitability.
An executive of a competing firm exhibiting at the MGMA conference says his company has alliances with WebMD to provide some services for its physician work flow system, but if WebMD is not ready when his company is to add those services, his firm will find another vendor.
Even so, providing good customer service over the long haul, not being first to the market, will produce winners in the competition, according to the executive.
"The reality is, this is a marathon, not a sprint," he says. "I think there are going to be multiple winners."