After Getting the Flu, Healtheon Looks Much Better

Today being Friday the 13th, it seems fitting to talk about fears which have been plaguing the Net market lately. There are, of course, fears of rising interest rates; fears of a slowdown in Net traffic; fears of Y2K.

Despite the fears, Internet shares are starting to stabilize. In the past week, the ISDEX is only down 1.7%.
Here’s a look at the chart:

The worst performer was
Healtheon (HLTH). Then again, this week, the company’s lock-up period expired. A lock-up requires that a company prevent most employees and major shareholders from selling stock within a six months period, so as to reduce undue selling pressure on the IPO. For Healtheon, the lock-up freed between 18-20 million shares for sale (the outstanding share total is 53.2 million).

However, lock-ups tend to be temporary in nature, as there usually isn’t bail-out selling. After all, the SEC has restrictions on how much the big shareholders can sell (such as the directors and officers).

Despite this, Healtheon fell 18% on the day its lock-up expired.

It’s hard to believe that this stock was once selling at 126-3/16; now the stock is trading at 34-1/8 (at a $2.4 billion market capitalization).

Actually, yesterday the company reported its quarterly earnings. It lost $17.6 million or 25 cents a share, which compares to $12.7 million or 47 cents per share in the year-ago period. First Call was estimating a loss of 22 cents.

Revenues, though, soared to $22.7 million compared to $10.9 million in the year ago period.

In a way, Healtheon is a business-to-business play. For example, Healtheon recently purchased MedE America (MEDE), which develops transaction systems that link hospitals, pharmacies, physicians, payers and benefit managers. The MedE America network has 20,000 physicians, 1,100 hospitals, 42,000 pharmacies, 10,000 dentists and 650 payers.

Healtheon serves consumers, as well. To augment this, the company purchased Medcast, which is a medical information portal.

But, of course, the biggest acquisition was WebMD, which secured such investors as Microsoft, Intel, Excite, Covad, Softbank and Dell Computer.

With these deals, Healtheon has also locked-up valuable Web real estate. The company has exclusive relationships with MSN, MSNBC, WebTV, Lycos and Excite.

Basically, Healtheon is on the fast-track to becoming the first end-to-end Net healthcare powerhouse. At its current stock price, it sure looks like a bargain.

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