WebMD Corp. last week posted a whopping net loss of $6.7 billion for 2001, a year in which it restructured a variety of information-technology businesses into three operating segments and depreciated or wrote down the value of billions of dollars in assets.
The Elmwood Park, N.J.-based health information company has never been profitable since its formation in 1998, and its net loss for 2001 was more than double the $3.1 billion net loss it recorded for 2000. The principal reason was a $3.8 billion charge in 2001 for impairment of long-lived and other assets.
But that charge, although an alarming figure, is largely a purge of inflated asset value built during an equity-financed acquisition spree in late 1999 and early 2000, said David Francis, a Nashville-based healthcare analyst with Jefferies and Co. The value of those acquisitions, when announced, totaled $9 billion in then-pricey stock. The current market value of WebMD is only $2.4 billion.
The restatements of asset value "do not reflect necessarily real dollars but rather the manifestation of doing many acquisitions using an over-inflated stock price, which through accounting translates into large dollar losses in write-offs," Francis said.
The write-offs acknowledge that WebMD is not going to recover that value in the current business environment that rejected the wild promises of Internet entrepreneurs, he said. The company also took a charge of $2.4 billion for depreciation and amortization.
Despite the multibillion-dollar losses, WebMD is not in dire straits, Francis said. The company has reduced the rate at which it is burning cash, he said, although its total cash on hand of $253 million is little more than half of last year's total. WebMD reported an operating loss of $82.3 million on revenue of $706.6 million, which the company took as a positive sign after losing $246.2 million on operations a year ago on revenue of $517.2 million.
Known originally as an online health information provider, WebMD derived only $75 million in revenue from that part of the business, one of three units into which the company was restructured.
WebMD's Envoy unit, which operates an electronic health-claims clearinghouse purchased in 2000, posted $384 million in revenue. Its Medical Manager unit, which markets a physician-practice information system acquired in a 2000 merger, earned $260.2 million in revenue.