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To: Paul Engel who wrote (81243)	5/20/1999 12:44:00 AM
From: Amy J	Read Replies (1) \| Respond to of 186894

Intel reported as strategic partner; Healtheon + WebMD; MSFT $ stake. This seems to be the week for healthy mergers :) Amy J Healtheon Corp. said on Wednesday it is planning to merge with the online medical resource WebMD. Kramlich also said that software giant Microsoft Corp. would take a major stake in the new company. He said under the deal there would be a group of strategic partners including pharmaceutical supply company McKesson HBOC Inc., computer chip maker Intel Corp. and Internet portal company Excite Inc. From reuters.com biz.yahoo.com Wednesday May 19, 8:06 pm Eastern Time Internet medical portal Healtheon plans WebMD merger (Adds Microsoft investment, paragraphs 6 and 9) By Deena Beasley LOS ANGELES, May 19 (Reuters) - Healtheon Corp. (Nasdaq:HLTH - news), which connects doctors, patients and insurers over the Internet, said on Wednesday it is planning to merge with the online medical resource WebMD in a deal that could make it a dominant player in the emerging online health care market. Healtheon said it was in merger talks with Atlanta-based WebMD, but would give no further details. The news sent the stock of Healtheon soaring by $24.375 to $80.25 on Nasdaq. Healtheon board member Richard Kramlich, however, told Reuters the board of the Santa Clara, Calif.-based company approved the deal two days ago and that WebMD's directors were slated to vote on the plan on Wednesday. ''Both managements have been engaged in the negotiating process. We expect them to approve the terms,'' said Kramlich. WebMD declined to comment. Kramlich also said that software giant Microsoft Corp. (Nasdaq:MSFT - news) would take a major stake in the new company. He said under the deal there would be a group of strategic partners including pharmaceutical supply company McKesson HBOC Inc. (NYSE:MCK - news), computer chip maker Intel Corp. (Nasdaq:INTC - news) and Internet portal company Excite Inc. (Nasdaq:XCIT - news). The stock-swap deal is structured as a 50-50 merger and should conclude in about four months, he said. Industry estimates have valued the merger at $5.5 billion. WebMD had been planning an initial public offering, but that registration was withdrawn last week. Earlier this month, Microsoft was said to be in talks to buy up to 27 percent of WebMD for $300 million or more before it was taken public. The broad interest in the deal speaks to the potential of the online health services and information market. Although the medical industry in general has been slow to make the shift online, analysts say it is poised to take off and grow rapidly, even by hyper-fast Internet standards. ''It is really ripe for explosion,'' said Kate Delhagen, director of online retail strategies at Forrester Research. "Health content is very popular online, and the commerce piece of the industry has started to open up. Initially, the merger would join Healtheon's back-office medical records focus with WebMD's medical content. Healtheon -- started in 1996 by Jim Clark, a founder of Silicon Graphics Inc. (NYSE:SGI - news) and Netscape -- uses the Internet to link health care providers, consumers and institutions. Through its Internet portal, doctors can share information, perform administrative tasks such as determining eligibility for care, and authorize clinical transactions like lab tests. WebMD, formed last October, offers information and discussion forums on health topics. Although it sells ads on its site, analysts see its revenue potential as limited without additional sevices. Although neither Healtheon or WebMD are involved in online commerce, they are merging at a time when several Internet pharmacies are appearing. The speculation is that after Healtheon and WebMD join forces they might seek to purchase or partner with one of the pharmacies. ''There would be a definite opportunity to move into the online pharmacy business,'' said Delhagen. ''That would be the third leg of the stool.'' ''I wouldn't be at all surprised if this combined entity starts snapping up online drug stores,'' said Jupiter Communicatins analyst David Restrepo. ''The companies in this industry are very young, but the speed of its consolidation is faster than for the typical Internet cycle.'' The two dominant players in the online pharmacy industry are the recent startups drugstore.com, 40-percent owned by Amazon.com Inc. (Nasdaq:AMZN - news), and PlanetRx. A third player, Soma.com, was acquired this week by U.S. drug store chain CVS Corp (NYSE:CVS - news). ''They're all betting on the massive value of the health care market in general -- it's in the trillions of dollars,'' said Delhagen. Healtheon went public in February, and reported a net loss for the first quarter of this year of $18.6 million, or 30 cents a share. WebMD has attracted other investors and distribution partners, including chemical and pharmaceuticals giant DuPont Co. (NYSE:DD - news), which has committed $220 million over five years.