WebMD founder, director resigns

WebMD Corp. founder and co-CEO Jeff Arnold resigned today, leaving medical industry veteran Marty Wygod the sole chief executive a month after he officially joined the Internet health company.

Arnold's resignation gives Wygod and his executives firm control of Atlanta-based WebMD. Chairman Mike Long is the last remaining member of the company's original senior-management team.

The announcement, coming an hour before WebMD executives were scheduled to meet with analysts in New York, ended a two-year odyssey that saw Arnold go from being an unknown Atlanta Internet entrepreneur to leading one of the online health industry's most important companies. Arnold, 30, also resigned from WebMD's board of directors. Healtheon founder Jim Clark, who is also the former chairman of Netscape Communications Corp., resigned from the board as well.

Arnold launched WebMD, an online service for doctors, in October 1998. His deal-making and marketing prowess put the company in the spotlight and caught the attention of Healtheon CEO Mike Long. In May of last year, WebMD agreed to merge with Healtheon, the company founded by Clark that was then considered the industry leader. The combination helped kick-start the nascent Internet health industry, and the new company, called Healtheon/WebMD, went on an acquisition binge.

Arnold and Long capped their spending spree last February with the purchase of medical software maker Medical Manager Corp. and its CareInsite Inc. Internet subsidiary. The companies were run by Marty Wygod, who in 1993, sold his Medco mail-order drug house and pharmacy-benefits company to pharmaceutical giant Merck & Co. for $6.6 billion. The deals closed last month and the company changed its name to WebMD.

But as WebMD turned from mergers and acquisitions to the challenge of integrating a far-flung empire of subsidiaries, Arnold's deal-making skills became less important to a company suffering from a sinking stock price and persistent questions about its strategy.

Wygod, 60, began to take on a more prominent role as the company's share price continued to drop in the wake of last April's market crash. Initially, Wygod was to be co-chairman. He then switched to a more hands-on position as co-CEO. Once the mergers closed last month, he quickly moved to replace most of WebMD's senior executives with loyalists from Medical Manager and CareInsite.

Analysts say that Arnold's resignation signals an emphasis on services for physicians and a shift away from consumers.

"My take on it is that Marty's vision always favored the B2B side rather than B2C. Jeff Arnold's more infatuated with consumer stuff," said Stephen Fitzgibbons, an analyst at San Francisco-based Chase H&Q.

Arnold's future plans remained unknown. In a statement, he appeared to acknowledge that the type of CEO needed by WebMD has changed. "In the last two years, we have put together the assets required for WebMD to take a leading role in the evolution of health care," he said. "Now, the focus is on streamlining the organization and delivering maximum value to shareholders."

Wygod praised Arnold. "Jeff Arnold's strong leadership and vision enabled the company, in a very short period of time, to assemble the necessary Internet and health care assets to participate in a fundamental change in the health care system," he said in a statement.

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