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WebMD (Nasdaq: HLTH) slipped 5/16 to 7 5/8 Tuesday after the online health company restructured a year-old partnership with News Corp., eliminating a pair of joint ventures.
The move, part of a plan by WebMD to get rid of strategic partnerships that are not likely to benefit the company, will result in a US$275 million charge to its fourth-quarter earnings.
WebMD said it will retain the rights to $205 million in domestic media services over 10 years, and will continue to provide content to News Corp. in exchange for $48 million over four years. In addition, WebMD will gain control over its international operations, with News Corp. transferring its 50 percent interest.
News Corp., in turn, will regain full control of the Health Network cable channel after WebMD relinquishes its 50 percent stake.
WebMD chief executive officer Martin J. Wygod said ending the News Corp. venture "marks an important next step" in the restructuring, noting that it "highlights our commitment to redefining our relationships so that they make both economic and strategic sense for WebMD and our partners."
Added Wygod: "In addition to reducing WebMD's outstanding shares, I believe that we have restructured this relationship in a way that allows both WebMD and News Corp to apply their respective expertise and resources where each can create the greatest value for shareholders."
W.R. Hambrecht called the partnership restructuring "a small positive" for WebMD, but said it was maintaining a neutral rating on the stock in light of "significant uncertainty" about the company's overall restructuring and outlook for 2001.
Last week, WebMD shares rose as it ended
an alliance with DuPont as part of its plan to evaluate its partnerships
in light of profit potential and strategic relevance.
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