WebMD Checkup

There's nothing like some hard times to make a company re-evaluate the company it keeps.

Theres nothing like some hard times to make a company re-evaluate the company it keeps. Internet health property WebMD (Nasdaq: HLTH), which is in the middle of a massive restructuring, is rapidly redoing its partnerships to push up its profit target.

The effort illustrates the big difference between dot-coms circa 1999 and dot-coms now. Like many Internet companies, WebMD signed a host of big-ticket agreements in 1999 to tout key partners and boost its stock price. Many of the deals involved stock swaps, but now have to be redone since Internet valuations have plummeted. In the new world order, WebMD will judge partnerships by profitability timing and strategic relevance — criteria that should have been used in the first place.

One partnership to get new terms was the deal with News Corp. WebMD will dish off The Health Network, a cable network, to News Corp. and will dismantle an international joint venture. WebMD said it will take a noncash charge of $275 million for the quarter ended Dec. 31, 2000.

Apart from WebMDs mantra that its partnerships have to make "economic and strategic sense," News Corp. had good reason to bail — it could have been stuck with a bunch of preferred shares. News Corp. still gets WebMD shares, but its potential stake in WebMD is significantly reduced. The two will continue to work together on a nonexclusive basis.

WebMD earlier ended its e-business partnership with DuPont.

The company is putting its financial house in order, and the fun is just beginning. Analysts expect WebMD to renegotiate partnerships with America Online (NYSE: AOL) and Microsoft (Nasdaq: MSFT) in the next several weeks. In a research note, Tucker Anthony analyst Cydney Kislin says WebMDs new deals could lead to lower revenue forecasts for 2001, but leave the company in better financial shape. Kislin rates WebMD a "buy" for "long-term, speculative investors."

Earnings tracking firm First Call anticipates WebMD will report a loss of 17 cents per share on sales of $190.5 million in early March.