The Wall Street Practitioner
The Long and Winding Road to Profitability
A Columnist's Parting View of the "Dot-Bomb"
By Scott Gottlieb, MD
WebMD Business Columnist
April 19, 2001 -- This column will be my last for WebMD. As the market for Internet stocks continues to plunge, I've become a casualty of the dot-bomb.
For those who have missed the news on WebMD, the company reported its fourth quarter earnings a few weeks ago, putting a close to a 2000 of restructuring. The company had revenues of $775.3 million in 2000, the biggest piece coming from the company's transaction-processing business. The content side of the business, however, continued to drain money. That's where I come in, or rather, where I exit.
I remain optimistic about the future of WebMD, even as I pack up my pencil case and steno pad. The company has succeeded in aggregating the eyeballs of doctors and patients into one place on the Web. It's built a healthcare brand around its web address, and it's now poised to leverage its position into vast, new markets.
Already, doctors are talking about making house calls over the Internet and filling prescriptions electronically over their Palm Pilots. The American Medical Association is pursuing HMOs to reimburse doctors for email to their patients, and a pilot program started in California is already paying doctors to keep in touch with their patients over portals.
Pfizer has recently moved onto WebMD's turf, forming a joint venture with partners Microsoft Corp. and IBM to sell software and services to doctors. Pfizer's goals -- eliminating administrative paperwork that ties up much of doctors' time and automating clinical functions, such as prescribing -- sounds a lot like WebMD's current business plan. Evidently, there's something to be gained in this market niche.
As the Internet becomes increasingly important to the delivery of medicine, WebMD will stand to benefit, so long as it endures the twists and turns along the way and makes the appropriate transitions.
Those who read The New, New Thing by Michael Lewis, knew WebMD's trajectory was not going to be a continuous ride to the sky. Lewis describes Healtheon, which merged with WebMD more than a year ago, as little more than an idea that the Web would one day dominate healthcare. Healtheon's early backers are portrayed as having no clear idea how they would capitalize on this promise. They created a Web company that they said would be involved in healthcare delivery. They left the rest to be figured out later. They built it and figured people would come.
This wasn't any way to write a business plan. In that respect, it's reminiscent of General Magic, a company I worked with seven years ago while I was an investment banker for Alex Brown.
General Magic wasn't really a company in the traditional sense. It was a group of technology savvy businessmen who said they wanted to create products that would allow wireless communication from handheld devices. What they were envisioning were units like today's Palm Pilots, only the technology didn't yet exist. Their stock skyrocketed on the first few days of trading, only to sink below a dollar years later when it became clear that their ideas weren't going to be so easily executed.
But they hung on. While General Magic tinkered with its ideas, other companies sped ahead of them. The company reinvented itself several times, and today provides automated telephone services to wireless consumers -- talking attendants powered by artificial intelligence. It's a long way from their original ideas, but they remained loyal to their visions of their future, and their stock is back up again.
Janus Mutual Funds recently dumped most of their $900 million investment in WebMD. I'm less pessimistic.
Having created a destination for doctors and consumers, the company is poised to capitalize on the Internet's promise, so long as it remains nimble and adapts itself as the role of the Internet in healthcare becomes clearer.
In the meantime, I'll keep my pencils sharpened.
© 2001 WebMD Corporation. All rights reserved.
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