| Topic Name: |
The New New Thing |
| Message Name: |
CEO |
| Date Posted: |
05/24/2000 |
| In Reply To: |
Anyone here read The New New thing? What do you think are the prospects for Healtheon/WebMD? The stock is at 16 after being at an all time high of 126, the issue price was 8, the first day trading price was 34, and the book value is 25!
Any comments? |
| Message: |
Apparently the CEO is a total salesman. This can be good and bad. Good in that in the beginning of building a company/industry, that is exactly what you need. Within the internet industry especially, the better you are at hype, the higher valuation your company gets. A big question is whether or not the industry is transitioning into this "Show me the earnings" mode. If so, that requires a great deal of execution skills, which salesmen usually don't have.
Also, the market is correctly responding to overinflated valuations. Healtheon is valued at $1.8 billion. It is, and likely never will be, worth that. The one thing that internet companies never discuss is that if the space that they enter and dominate is so profitable, competition will enter and eat into their margins. That is an immutable law of nature. One only needs to look at the auto industry, which once held hundreds of manufacturers as an example. The market leaders are often chosen through seemingly random events. (See chaos theory - butterfly in Hong Kong analogy.)
Lastly, the reason why the medical community hasn't made any money is because doctors are extremely ego-centric. They know medicine, so they must surely know business, right? No way, these can't manage thier way out of a paper bag. Just because you make a four person office profitable doesn't mean you have any of the skills necessary to run a business. Also, the doctors that run healthcare organizations are usually the huckster types anyway.
Final verdict: Healtheon is not worth its current market cap. However, there is a small chance that all the planets could line up in thier favor in the future. If you want to bet on that horse, knock yourself out.
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