What nerve! Happy endings? What happy nerve endings? You see, if my buddy Paul listened to himself, he surely would have come up with the same question that I pose now. If AOL and GO.com think drkoop.com stock is going to zero, why did they just take some in lieu of the $24 million in cash the company has in the vault?
It doesn't make sense. This isn't a Monopoly game between friends, where deals are cut in the waning moments to prolong the contest. AOL and GO.com gave up physical legal tender for drkoop.com paper. (In GO.com's case, it was reduced payments and stock warrants.) The only logical explanation is that the AOLs of the world think drkoop.com's shares will appreciate over time.
Either way, are you going to bet against the world's leading online service? Let's shed some light on Paul's four main concerns.
Cash Burn
Paul himself wondered why the company went public so early in its life cycle. It's true. In many ways, drkoop.com is still a toddler. Rookie mistakes have been made, but upstarts that survive learn from their earliest blunders. It's comforting to know that even the most concerned analysts expect the earnings picture to improve. But, the lingering doubt -- that the company won't be around to turn cash-flow positive by the end of next year -- has been easing now.
Broken Model
Give me a company with a perfect business model, but no traffic -- or one with a flawed premise, but millions parked on the front porch -- and I'll choose the broken model every time. Why? Because it is easier to mend than to create. It is easier to tweak drkoop.com's business strategy than to build out the traffic and brand reputation that drkoop.com has online.
The company has the global health portal down cold. Unfortunately, I know. The Munarriz clan hasn't exactly enjoyed a banner year wellness-wise, and I've found drkoop.com to be an indisputable tool of comprehension and community.
But, that has never been the problem. The woes at drkoop.com are invisible to the consumer. The problem is back-end cost control and opportunities missed -- and that is being addressed right now.
Low Morale
Again, typing "morale" and "pink slips" into Drug Checker yields a "dangerous side effects" warning. But, the company is making the necessary move by taking a step back. My heart goes out to those let go. The drkoop.com mental health area can help, but I'm sure the gesture is lost on those heading out.
Can morale possibly be improving? The dark cloud of obsolescence has been looming overhead since March. With labor savings and, more importantly, the significance of AOL and GO.com as shareholders, the skies are a little less gray right now.
Controversial Management
So, the executives cashed out some (Koop himself sold just over 20% of his stake). I can try to brush it off as no big deal. I mean, tech companies traditionally compensate for lower base salaries by offering stock options. This is a natural occurrence that is as routine as cashing a paycheck. But, if you want to be particular, note that drkoop.com execs cashed out at prices that were four times higher than today's going price. I'd be curious if they are buying or selling the next time that one-week window comes around.
In summary, I'm not naive. I'm not blindly admiring the architecture as I walk by the ruins. There are risks here. The shares are in the ICU (intensive care unit), and pessimists are wondering if they will be able to say those same three letters to drkoop.com by the end of the year. But, at today's price, those who believe will be rewarded handsomely if things pan out. Naturally, I think they will pan out. Online health content isn't going away and drkoop.com is the best. Just yesterday, it became the only online health company to be named a finalist for the 2000 Computerworld Smithsonian Award.
drkoop.com is the class of the class -- like Coca-Cola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %>, which also had its share of layoffs earlier this year. The company provides a necessary Internet resource. America needs drkoop.com in good health. Then again, so does America Online.
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