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WebMD CEO resigns, company stops sale explorationWebMD CEO Gattinella resigns, company stops exploring possible sale
INDIANAPOLIS (AP) ' WebMD Health Corp. CEO Wayne T. Gattinella has resigned, and the healthcare information services provider said it stopped talking to potential acquirers about a sale of the company.
The New York company also said Tuesday it expects 2012 earnings to be "significantly lower" than in 2011 as it faces tough competition and its drug company customers deal with patent expirations. WebMD provides health and benefits information to consumers, employers, doctors and health plans.
The company's shares plunged in heavy trading after it made the announcements.
Chief Financial Officer Anthony Vuolo will serve as interim CEO while the company looks for a permanent replacement. Vuolo also serves as chief operating officer, and that responsibility will be taken over by members of a newly formed management committee that will work with the interim CEO.
Citi analyst Mark S. Mahaney saw the leadership change as a negative for the company. He said in a research note Gattinella served as CEO for about six years, and the analyst has long considered him to be "a very capable executive." Citigroup Global Markets Inc. has provided investment banking services to WebMD.
The analyst also saw WebMD's decision to stop exploring a possible sale as another negative. He said the company likely didn't think it could get high enough bids given its weak fundamental trends.
WebMD said a special committee of independent directors has ended its review of a possible sale of the company after discussions with several potential acquirers.
Billionaire investor Carl Icahn took a 9.5 percent stake in WebMD in November, and his firm, Icahn Capital LP, has said it opposes a sale. Icahn did not return a call from The Associated Press seeking comment.
WebMD said its 2012 revenue may fall by 2 percent to 8 percent as some of its drug company customers deal with patent losses that will affect their marketing expenses. WebMD also said it expects expenses to rise in the new year, and it is facing more competition in its consumer product networks mainly from ad networks and social sites.
It expects earnings to be "significantly lower" than in 2011, but it didn't offer earnings per-share guidance for the new year.
"While we face near-term challenges, I am confident that there is significant growth opportunity ahead for WebMD," Chairman Martin J. Wygood said in a statement from the company. "I believe that the pressure facing the pharmaceutical industry will ultimately prove to be the strong catalyst for a meaningful shift by them to digital marketing solutions."
The company will offer more details on its 2012 expectations on Feb. 23 when it reports on 2011 earnings.
In November, the company announced third-quarter results that missed analyst expectations and cut its revenue estimates for the fourth quarter. It earned $14.2 million, or 24 cents per share, in the quarter on $135.1 million in revenue.
WebMD, which cut its revenue outlook twice last year, said in November it expects fourth-quarter revenue to be $147 million to $157 million, which fell short of analyst expectations at the time.
Company shares sank almost 23 percent, or $9.81, to $26.92 in midday trading, while the Nasdaq exchange climbed 1 percent. WebMD shares topped $58 in May but have fallen steadily since then.
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