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WebMD Acquires Medscape's Portals

Online healthcare information play WebMD Corp. is acquiring the portal assets of MedicaLogic/Medscape Inc. for $10 million in cash.

Elmwood Park, N.J.-based WebMD said the deal includes the Medscape Medical Professional and Medscape Health for Consumers Web sites.

Hillsboro, Ore.-based Medscape, whose stock had been trading well below $1 a share, is a provider of digital health records and online information. The company's digital health record business will continue to be conducted under the MedicaLogic name.

WebMD is buying the "Medscape" trademark and the Medscape Medical Professional portal will become WebMD's online brand of information, research and educational services for physicians and other medical professionals.

WebMD Health will continue as the company's brand for online information, community and services aimed at consumers.

"We have been investigating various options that will improve the financial condition of the company, and that ultimately will make sense for our business, our customers and our shareholders," said Mark Leavitt, MedicaLogic chairman. "The sale of the portal business helps us achieve that end, and allows us to continue to focus on our core strength -- our digital health record business."

With the addition of the Medscape assets, WebMD's newly expanded WebMD Medscape Health Network will reach more than 15 million cumulative monthly visitors, including about 575,000 members registered as physicians worldwide, WebMD said.

"This acquisition is a great opportunity to further strengthen our product offering for physicians and is in keeping with our goal of creating the leading communication channels connecting physicians and their patients with health plans, providers and suppliers," said Martin J. Wygod, board chairman and CEO of WebMD. "Although there are strategic synergies, we expect to incur certain costs and expenses related to the combination of the respective operations. The acquisition may impact our financial expectations by $1 million to $2 million for each of the next two quarters as we complete the integration."

Analysts on average are expecting a loss of 3 cents a share for the current quarter. For the third quarter, WebMD lost $19.5 million, or 5 cents a share, on a pro forma basis, compared with a loss of $65.8 million, or 27 cents a share, in the year ago period. Revenue for the quarter was $167 million, compared to $151.2 million in the year-ago period.

Also included in the company's third-quarter results was a charge of $3.8 billion, or $10.64 a share, related to goodwill impairment.

WebMD (formerly Healtheon/WebMD) offers services to connect physicians, hospitals, pharmacies, insurance providers, and consumers with transaction and information retrieval systems.

The president left the company last September in a management shakeup. Like many companies formed in the late 1990's dot-com gold rush, WebMD is now struggling to cut costs, absorb its pricey acquisitions and turn a profit.