Critics say Jim Clark's vision lacks follow-through

So it goes for Jim Clark, the man credited with creating and walking away from a trio of billion-dollar companies: Silicon Graphics, Netscape Communications and now WebMD.

Clark's resignation from the WebMD board of directors earlier this month has thrown a spotlight on his reputation as a soothsayer with an uncanny ability to predict and bring into being the "new, new thing," to take a phrase from his now-famous biography.

While many analysts say the jury is still out on WebMD, Clark's sudden departure from his third major venture has led some to revisit his status as a divining rod. Others go further, noting that Clark's aura of genius has long been offset by his reputation as an impatient investor with little taste for the nuts and bolts of building a company for the long haul.

"What happened at WebMD? A guy took over who knew something about health care," said Efrem Sigel, an analyst at New Rochelle, N.Y.-based Corporate Research Group. "Clark had the right idea...but he wanted to create a company on the back of an envelope."

Added Prudential Volpe Technology Group analyst Sean Wieland: "Expectations got way ahead of themselves. (Clark is) a visionary guy, and he saw an opportunity. But he was a little naive in terms of the complexity and politics of health care."

Clark, 56, was unavailable to be interviewed or to respond to written questions for this article, according to his publicist. Despite analysts' concerns, he has faithful supporters who describe him as committed and insightful.

Clark has weathered criticism before, when Netscape sagged under relentless competition from Microsoft in the browser wars and eventually agreed to be bought by America Online. In his ghostwritten autobiography, "Netscape Time," he openly admits that many of the accusations are true.

In the book, he refers to his "deep-seated streak of impatience" and seat-of-the-pants attitude toward company-building.

"A lot of very smart entrepreneurs are quite rational about how they take chances; they think it through then work out contingency plans should things go wrong and they need a fallback position. I'm not good at that," he writes unapologetically. "My point of view has always been, Damn the torpedoes...It's a driven state, a mild form of insanity--or at the very least, a kind of selective dumbness."

The criticism has taken on new life in the stomach-wrenching slide in Internet stocks this year, which has scarred many investors--including Clark.

Critics point to the demise of teen Web site Kibu.com as evidence of the visionary's impatience.

Kibu was founded in 1999 and in February attracted a $22 million investment from Clark, former Excite@Home chairman Tom Jermoluk and venture capital firm Kleiner Perkins Caufield & Byers. The company shut down this month and returned money to Clark and other investors, citing the current market jitters.

For some, the incident underscored what Clark himself has described as his opportunistic nature and raised new questions about his status as a market visionary.

"People were working hard, and we thought we were well-informed of what was happening," said one former Kibu employee. "There was always talk of money, of keeping the runway cleared (for takeoff). Then we got the word on Monday that there might be layoffs or a closure, and it was all over in a week...It was a surprise."

Similar questions hang over Clark's departure from WebMD--the culmination of a stalled effort to turn the medical industry on its ear.

The venture started off in 1995 as Healtheon, created with the goal of using the Internet to ease supply chain and documentation bottlenecks in the $1.4 trillion U.S. health care industry--a figure repeated frequently in company promotions signaling the size of the potential prize.

"Everyone was excited about this company in the beginning because of Clark," said Troy Dayton, a health care analyst with Dresner RCM Global Investors in San Francisco. "Anything he touched turned to gold."

The honeymoon came to an end, however, when it became clear that Clark and his team had underestimated the challenges of revolutionizing the medical business.

"Clark learned he couldn't just use his network of contacts to strong-arm people into going his way," said Prudential Volpe's Wieland. "He got frustrated."

Armed with a hefty stock price, Healtheon went on a buying spree as it reached into all aspects of health care, providing medical information to consumers, linking doctors and patients, and creating hard-core business-to-business applications. The consumer side of the business took more prominence following the acquisition of health Web site WebMD, which led the company to change its name to Healtheon/WebMD (eventually shortened to WebMD) and to embark on an aggressive media strategy, including plans to create TV programming.

WebMD "wanted to be all things to all people," said Corporate Research Group's Sigel. "That's not the basis for a successful business strategy."

As the scale of the company's operations grew, Clark began to lose interest and influence, according to analysts.

"Jim Clark had no sway" at WebMD in the end, said Steven Halper, an analyst with Credit Suisse First Boston. "He was not at all involved in setting the company's direction."

Messy breakup
If Clark was growing less influential inside WebMD, he was not shy of using his name in an apparent bid to drum up investor excitement for the company, which began waning early this year.

On April 26, Clark told interviewer Charlie Rose at an Internet health panel in New York City that WebMD expected to bring in $1 billion in revenues and become profitable on a timeline faster than the company was prepared to officially announce. The incident sparked WebMD to issue a statement distancing itself from Clark's comments.

"The company does not endorse published comments by one of the company's directors at a recent conference suggesting that these milestones could be achieved significantly earlier than previously suggested by numerous published analysts' models," WebMD wrote in a May 5 press release. A company representative confirmed that Clark was the director in question.

Even before that gaffe, Clark and WebMD board member John Doerr set the stage for an investor controversy, stepping up in April to buy $220 million of the company's stock on the open market during a slide in the company's share price. Critics point out that Clark quit without fulfilling his $200 million part in that promise--even though he reiterated his intention to complete the purchase just weeks before he stepped down from the board.

As of early August, Clark had spent just $9 million on WebMD stock purchases since announcing his intention to buy. In a statement issued at that time, WebMD said Clark was barred from purchasing stock because of insider trading rules related to the company's acquisition of rival Medical Manager, which closed Sept. 12.

The Medical Manager deal had other implications for Clark and key members of the WebMD executive team: According to some analysts, the seeds of a sweeping management shake-up this month were sown in the company's bid to save the acquisition from unraveling when WebMD's stock price plunged.

With WebMD's stock shedding more than half its value between February and May, Medical Manager chairman Marty Wygod saw an opportunity to recast the acquisition more to his liking, according to analysts. Threatening to call off the deal, he won new concessions, including a co-CEO appointment he would share with WebMD chief executive Jeffrey Arnold; a sweetened exchange rate in the all-stock transaction; and more seats for Medical Manager executives on the combined company's board.

"That was the initial crack in the armor, when Medical Manager recut the deal," said CSFB's Halper. "Any astute investor would look at this deal and conclude that Wygod took control of the company."

That control was further consolidated in the days after the merger closed, when Healtheon co-founder and WebMD chief technology officer Pavan Nigam quit, followed shortly by Arnold and Clark.

Nigam, reached at home, declined to comment. Other WebMD board members and executives did not respond to interview requests for this article.

In a statement, WebMD chairman Michael Long thanked Clark for his contributions to the company. "WebMD, as it exists today, reflects Jim's original vision for facilitating the integration of the Internet into the health care field," he said.

The new, new, new thing
Clark grew up poor, by his own account, in Plainview, Texas, where he dropped out of high school before serving four years in the Navy. There, he discovered electronics and math and launched his first business, a small loan enterprise.

After the military, Clark went back to school, collecting a master's degree in physics from the University of New Orleans and a doctorate in computer science from the University of Utah, all in preparation for an academic career. By the early 1980s, Clark was teaching electrical engineering at Stanford University, where he developed a graphics chip as part of a research contract with the Defense Department's Advanced Research Project Agency. That work became the seed of Silicon Graphics, launched in 1983.

After his relationship with SGI chief executive Ed McCracken soured, Clark left the company in 1994 to found Mosaic, later Netscape Communications, with the technical know-how of Marc Andreessen and several of his schoolmates at the University of Illinois. With part of his Netscape fortune, Clark launched Healtheon in 1996.

Clark has devoted a sizable fraction of his wealth and time to transportation. He flies a helicopter and sails an extremely large computerized boat, Hyperion, which he had custom built. He is building a second boat dubbed Athena.

In October 1999, Clark donated $150 million to Stanford University for the construction of a building dedicated to biomedical engineering and sciences.

Having left WebMD, Clark now sits on the boards of three companies, all privately held: digital photo start-up Shutterfly, financial management firm MyCFO, and genetics research company DNA Sciences, formerly known as Kiva Genetics.

All three companies arguably sit on the cusp of enormous potential. All three also face a key question: Can they count on Clark to help take them the distance?

Executives contacted at all of the companies said Clark is a dedicated and perceptive adviser.

Shutterfly CEO Jayne Spiegelman not only credits company co-founder Clark with "recognizing that demand for digital cameras will explode," but with helping attract talented employees through his contacts at Silicon Graphics and his reputation for backing winners. She also said he frequently advises the company on strategy and other details. For example, she said, Clark suggested key elements in an overhaul of the company's Web site, which was announced last week.

Shutterfly makes prints from digital pictures and helps people share photo files over the Internet. The company faces a huge number of competitors making more or less the same bet, although Shutterfly says it provides a proprietary printing process that offers higher-quality prints than do its rivals.

MyCFO chief executive Art Shaw seconded Spiegelman's sentiments, saying Clark is actively involved in the company. "He's a great thinker," he added.

MyCFO, also founded by Clark, manages the assets of the rich using what the company describes as a unique, holistic approach to financial planning. It is so far successful, having attracted 275 clients with some $40 billion in assets under management, including Clark's assets.

Perhaps the biggest potential upside among Clark's remaining ventures rests with DNA Sciences, a medical research company that hopes to develop genetic profiles of high-risk candidates for common diseases such as cancer. The data will be used to steer patients to preventive programs, make early diagnoses, and improve treatments.

Among the three companies, DNA Sciences also presents the most likely candidate for a slow and uncertain gestation and perhaps the greatest potential to frustrate Clark's often oversized ambitions.

Founder and CEO Hugh Rienhoff Jr. admits that the task before the company is "enormous," potentially requiring years of effort before it sees any tangible payoff.

For now, DNA Sciences is selling diagnostic kits to doctors and others interested in creating genetic profiles. By combining thousands of profiles, Rienhoff said, researchers will eventually be able to identify individuals who may stand a statistically higher chance of contracting particular diseases.

"We see this coming together over the course of the next three to four years," he said.

Rienhoff said he is not worried about Clark's ongoing commitment to the company.

"This is where medicine is going, and we want to be in the forefront of this effort," he said. "Jim is interested in creating a company of real value...His interest in this area is not evanescent."  

News.com's Paul Festa contributed to this report.