WEBMD: Financially Ailing Company’s Co-Founders Resign
WebMD Corp.'s co-founder and co-CEO Jeff Arnold and co-founder Jim Clark both resigned yesterday, turning control of the company over to Martin Wygod, who had shared the chief executive job with Arnold, the New York Times reports. Focusing on the company's bottom line, Wygod said that he hopes the financially ailing company will break even by the end of next year. WebMD has been losing more than $80 million every three months, and yesterday's resignations drove the company's stock to a 52-week low of $8.50 per share. Clark, who merged his company Healtheon with Arnold's WebMD in the hopes of forging online "connections among just about everybody in health care," said he had "confidence in the direction of the leadership of ... 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" (Freudenheim, New York Times, 10/13). Addressing his departure, Arnold said it was "the right decision for me and the company," adding, "The company needed one leader. It made sense for me to go" (Miller, Atlanta Journal-Constitution, 10/13). Wygod previously chaired Medical Manager Corp. and its Internet subsidiary, CareInsite, which were acquired by WebMD in a deal completed last month (Carrns, Wall Street Journal, 10/13). The merger gave WebMD access to roughly 185,000 physicians who were using Medical Manager's software (Ackerman, San Jose Mercury News, 10/13). WebMD also announced yesterday that the company, "pending board approval," will move from Atlanta, Ga., to Elmwood Park, N.J., where Wygod ran Medical Manager (Atlanta Journal-Constitution, 10/13).
The resignations of Clark and Arnold follow WebMD's decision last month to lay off 1,100 employees, merge offices and data centers and reduce marketing in an effort to save $250 million by the end of next year ( California Healthline, 9/29). Wygod, a "health care industry veteran," has been given the "task of knitting a coherent, profitable business from WebMD's various applications and far-flung divisions." While the company "continues to sustain large losses," WebMD said yesterday that it had $800 million in cash as of the end of last month and will receive additional funds from the sale of Porex, its medical plastics subsidiary (Wall Street Journal, 10/13). As a further cost-cutting measure, Wygod said that he plans to integrate WebMD's electronic system for sending and paying medical bills with its Medical Manager software, which assists physicians in organizing their offices, in an effort "to give doctors instant information about the insurance status of patients on a hand-held computer." The company also hopes to introduce a Web-based "conduit" to connect payers, providers and health plan members. Wygod added, "Over the next three months, we will renegotiate a dozen different strategic alliances that don't make sense in their current form. We will eliminate and write off any acquisitions that are losing a lot of money or don't work for us strategically" (New York Times, 10/13).