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Mrs. Gates joins drugstore
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August 23, 1999: 4:21 p.m. ET
Microsoft chairman's wife joins board as drugstore.com founder leaves
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NEW YORK (CNNfn) - The wife of Microsoft chief Bill Gates is joining the board of online pharmacy drugstore.com, while founder Jed Smith is leaving the company to start another business.
The departure Monday was one of several management moves that included the appointment of Melinda French Gates, wife of Microsoft Corp. chairman Bill Gates, to the board of the Bellevue, Wash.-based company.
Melinda Gates worked at a variety of positions at Microsoft before leaving to handle operations at the couple's philanthropic organization.
The 33-year-old Smith founded drugstore.com (DSCM), which began selling pharmaceuticals and health and beauty products online in February. In a press release, Smith wouldn't say what's next for him -- other than the fact that it would be another entrepreneurial venture.
David Restrepo, online health-care analyst at Jupiter Communications, said Smith's departure probably will not change the company's day-to-day operations or outlook.
"He's taken a behind-the-scenes role," said Restrepo, noting that Smith had the original concept and design for drugstore.com. "Peter Neupert [the company's chief executive officer] always had the higher-profile role."
In other board news, drugstore.com announced another new member, Martin Grass, the chairman and CEO of Rite Aid Corp. (RAD), a partner and major investor in drugstore.com.
Smith stayed with the company to usher it through its initial public offering, which hit the market in late July. The company's stock initially was greeted strongly and rose to $70 per share, but later settled back into a lower range. It was trading just below $50 per share Monday afternoon.
Restrepo said the company's stock decline wasn't representative of any changes in the company's fundamentals. He said the firm had a typical "dot-com" IPO that took it to unsustainable heights early on.
Despite some high name recognition and a convenient Web address, drugstore.com isn't the dominant seller of pharmaceuticals and health products on the Web.
In fact, in the not yet mature online druggist market, neither drugstore.com nor rivals such as CVS and planetrx.com have emerged to grab hold of the majority of sales.
At this point, analysts predict the online drugstore market will shake out in a manner similar to their brick-and-mortar counterparts -- namely, two or three firms will emerge with the lion's share.
That's not to say there won't be some heavy jockeying for position. The stakes are too high. A Jupiter Communications study predicted the online consumer health-care market will be $1.7 billion by 2003.
As drugstore.com faces what will be an increasingly more crowded market filled with aggressive players it does have two major advantages, said Restrepo.
One is the company's alliance with Rite-Aid, which has a major pharmacy benefit manager (PBM) business. PBMs run prescription drug benefit plans offered by U.S. employers. Rite-Aid will attempt to channel online sales at its stores through drugstore.com.
In addition, online retailer Amazon.com also has partnered with drugstore.com, funneling its consumers to the pharmaceutical sales site.
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