Clark and co-CEO depart WebMD

Clark, a pioneer investor, has run into trouble with some of his recent Internet investments. Last week, teen site Kibu.com, which received funding from Clark in February, said it would shut its doors.

WebMD said Jeffrey Arnold has resigned from his shared position as chief executive and from the board. Martin Wygod now serves as the sole chief executive.

The Atlanta-based company did not disclose reasons for the departure of the two executives and did not name replacements to the board.

"In the last two years, we have put together the assets required for WebMD to take a leading role in the evolution of healthcare," Arnold said in a statement. "Now, the focus is on streamlining the organization and delivering maximum value to shareholders. I am confident that the team in place can successfully lead this effort."

Clark, who is best known for founding Netscape with Marc Andreessen, also founded Silicon Graphics (SGI) and helped start Healtheon, a medical information Web site that has since merged with WebMD.

Clark and venture capitalist John Doerr in April announced they would invest $220 million in the Internet-based health services network, which helped boost the ailing stock price. Since that announcement, Clark has invested just over $9 million--far from the amount touted.

Other investors in WebMD include Janus Capital, which in January agreed to invest about $930 million, and News Corp., which agreed in December to invest about $1 billion.

But just last week, Janus applied to sell in the open market its stake in the beleaguered company.

Patrick Hojlo, an analyst with Banc of America Securities, said while some people may have been surprised by Thursday's departure announcements, the move is not altogether shocking.

"Marty Wygod slowly has taken more control of the company," he said. "The power base (between WebMD and Healtheon) needed to be consolidated under somebody. Marty is the logical person with whom to consolidate management power in the organization."

Hojlo added that Wygod has the extensive healthcare background and experience needed to steer the company in the direction it is heading.

"Marty is the right man to run this company," he said.

Other analysts added that Clark and Arnold were in a sense the visionaries behind WebMD while Wygod understood the nitty-gritty details of the health industry. What the company needs at this time to gain momentum is more operation efficiency than big visions, they said.

"With Arnold's departure, it doesn't surprise me that Clark left the board," said Jeff Peters, an analyst at Dain Rauscher Wessels. "People really didn't expect the (co-chief executive arrangement) to last too long."

WebMD declined to cite any reasons for Clark and Arnold's resignations.

WebMD in September announced a companywide restructuring plan that will eliminate roughly 1,100 jobs. The move stemmed from the overlap created from the combination of several companies acquired by WebMD including Envoy, Medical Manager, Careinsite and OnHealth Network.

WebMD, which was formerly known as Healtheon/WebMD, expects the plan to save it about $250 million annually by the fourth quarter of 2001.

In a meeting with analysts held in New York on Thursday, WebMD executives released additional details related to the reorganization initiative.

The first phase of the plan calls for WebMD to consolidate offices and data centers, reduce marketing and promotional expenses and eliminate redundant positions. Phase two entails consolidating sales forces and focusing on customer service, generating revenue and eliminating non-strategic and non-profitable products and contracts, executives said.

Under phase one, executives at the meeting said they plan to close about 65 facilities with a goal of cutting general administrative costs by $171 million. WebMD will outline additional savings targets at the end of the fourth quarter.

In the near term, executives said they intend to sharpen the company's focus in serving and targeting products toward physicians, pharmaceutical services companies, consumers and insurers.

Though executives did not disclose targets for its third quarter, they did say they expect to end calendar year 2001 on a cash-positive basis.

The company expects to report third-quarter earnings during the week of Nov. 12.

The departures also come on the heels of another management shakeup at the company. Just last week, WebMD announced the resignation of chief technology officer Pavan Nigam, who co-founded Healtheon in 1996. Nigam, 41, is leaving the company to pursue other interests but will continue as an adviser to the company through the end of the year.

WebMD recently named Dr. Steven Zatz, 43, to the newly created position of executive vice president of the Internet portals and applications services group. Zatz's position replaces the CTO role.

Thursday morning, shares of WebMD rose 88 cents, or 9 percent, to $10.56--still well off their 52-week high of $75.19. The stock has fallen about 75 percent for the year and recently neared a 52-week low of $9.53 a share.