Microsoft and Partners Going to the Doctors

In a high-profile alliance that may hedge its bet on WebMD (HLTH Quote), Microsoft (MSFT Quote) is teaming up with Pfizer (PFE Quote) and IBM (IBM Quote) to market software and other services to the country's doctors.

Pfizer announced Thursday that the independent company's aim is to reduce the paperwork eating up doctors' time and wallets and to automate functions such as writing prescriptions. The company will target one- and two-physician offices.

Microsoft said the project will offer services similar to those of WebMD, in which Microsoft invested $250 million in 1999. But Microsoft said the new project would target a different segment of the 580,000-doctor market. Microsoft and its new heavyweight partners have not released financial details of the unnamed project, nor have they announced the management team. They have said the system will allow doctors to use handheld devices to write prescriptions, to check lab tests and to communicate with colleagues and patients via email.

"To have these two big names as partners is very impressive and shows that they will have complete solutions and will aid (each other) in marketing," said Crowell Weedon analyst Jim Ragan, who rates Microsoft a buy. (His firm hasn't done underwriting for the company.)

The physician products, scheduled for release later this year, will be offered over the Web, signaling another step forward for Microsoft' s comprehensive .Net software-as-a-service strategy.

"It shows Microsoft's commitment to transforming their businesses, utilizing the Web to tie software and services into hardware other than the PC (such as PDAs)," Ragan said.

According to the announcement, "The company will pursue acquisitions, partnerships and other investments," to support the new venture.

Monday, Oracle (ORCL Quote) and HealthSouth (HRC Quote) announced a similar joint effort to create a "digital hospital" to help institutions manage patient and administrative data. Companies, including WebMD, have had trouble in this area because doctors have been hesitant to adopt technology that isn't compatible with their old systems and that presents privacy concerns.

Microsoft already has a nonexclusive partnership with WebMD. On Wednesday, Microsoft announced that it will provide the technology for WebMD's new wireless handheld computer system for doctors, expected to be introduced late this year. Also, WebMD will be the primary provider of health information on MSN and other Microsoft-affiliated Web sites. Financial terms of the proposed agreement weren't disclosed.

Still, with the new Pfizer/IBM deal, it looks as if Microsoft is hedging its bet on the struggling WebMD, which last week reported a fourth-quarter net loss of $1.3 billion, or $3.75 a share, compared with a loss of $234.7 million, or $1.98 a share, a year earlier.

Microsoft, of course, says it is very confident in the future of WebMD. "WebMD will complement the new company; it will be up to Pfizer to create the best points of synergy between them," said Microsoft's worldwide group manager for health care, Rich Noffsinger.

On Thursday, WebMD's stock dropped 33 cents, or 7.7%, to $4.88, the same day the company announced a stock-repurchase program. Under the program, WebMD can use up to $50 million to buy back its common stock beginning next week.