Microsoft, WebMD scrap partnership

A high-profile partnership between Microsoft and WebMD that was supposed to "bring the power of technology and information to consumers and the health-care industry" was scuttled Sunday, although the companies will continue working on other projects.

During the dot-com halcyon days in early 1999, Microsoft and WebMD announced they would jointly develop technology using the Internet to streamline the way information is used in the health-care industry and shared with consumers. But the companies were unable to complete a technology-sharing agreement, and lately they have dallied with each other's competitors.

WebMD, which provides administrative software to medical professionals and health information to consumers, gave Microsoft a bigger presence in the health-care market, and it continues to provide content to the MSN Internet portal and MSNBC news channel. WebMD will also make its upcoming wireless service compatible with Microsoft-based handheld computers.

"Microsoft is an important strategic partner for WebMD and will continue to be," said WebMD spokeswoman Jennifer Meyer.

In May 1999, Microsoft invested $250 million in Elmwood, N.J.-based WebMD and said it would bring the company an additional $250 million worth of revenue from subscriptions, ad sales and e-commerce sales from their venture.

WebMD agreed to use Microsoft technology in the software and online services it sells to doctors and health-care institutions. WebMD also agreed to make its software compatible with Microsoft-based servers and handheld computers and to share content.

Last March the companies announced that their partnership was being renegotiated, and on Sunday they said the technology agreement fell through.

Neither company would say exactly which technology was at issue in the negotiations, and their statement contained few details. It was made in an announcement from WebMD saying that Tuesday's terrorist attacks and the resulting telecommunications and travel interruptions would hurt its revenue.

Analyst Rob Enderle, who follows Microsoft for Giga Information Group in San Jose, said the deal involved .NET, Microsoft's new platform for Internet-based software and services.

Enderle said Microsoft may have withdrawn because WebMD agreed to also provide content to America Online, an arch competitor of the Redmond software company.

"If the folks they are investing in are making moves toward AOL or any other competitor, they are going to pull back their investment," he said.

Microsoft is also close to WebMD competitors. In March it agreed to form a new company with IBM and drug company Pfizer to provide software and technology services to doctors, in direct competition with WebMD.

Rob Plaza, a health-care technology analyst at Morningstar in Chicago, said Microsoft probably backed out because the deal was less attractive than it appeared back in 1999.

"I think Microsoft was dumping it because it wasn't going to make them any money," he said.

Other factors could include the changes at WebMD. In the dot-com shakeout and consolidation, WebMD absorbed a number of other companies, and the management team that made the original deal with Microsoft is gone, Plaza said.

Both Microsoft and WebMD continue fighting for bigger shares of the health-care-technology market, where Plaza said spending will be around $23 billion this year.

"It's a huge focus here," said Microsoft spokesman Chris Schneider, who noted the WebMD partnership is one of hundreds that his company has made in the health-care industry.

Brier Dudley can be reached at 206-515-5687 or