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Monday, February 26, 2007 - Page updated at 12:00 AM

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Microsoft buys consumer health Web-search firm Medstory for undisclosed amount

Bloomberg News

Microsoft continues foray into health-care software with purchase of Medstory

Microsoft, in a push to expand its health-care software business, agreed to buy Medstory, operator of an Internet search engine for consumers that finds health and medical data.

Terms won't be disclosed, said Steve Shihadeh, general manager of Microsoft's health software group. The world's largest software maker expects the purchase to be completed next week. Foster City, Calif.-based Medstory has 10 employees.

Microsoft Chief Executive Officer Steve Ballmer, who plans to announce the deal in his first keynote address at a conference for technology workers in health care, has boosted hiring by about tenfold to develop a business selling software to hospitals and doctors. The company plans to expand to consumer health-care software, Shihadeh said.

"The systems that exist today in health care haven't really been developed with the consumer in mind," said Steve Aylward, general manager of Microsoft's U.S. sales group that serves the health-care industry.

Medstory helps consumers searching for information on medical conditions. Since many people use the Internet to get data to help make medical decisions, the search engine is a good way for Microsoft to gain entry into the consumer health-care software market, Shihadeh said. The company is considering additional products that would help users manage and control access to their medical data, he said.

Microsoft in July agreed to buy Azyxxi, a piece of hospital software that aggregates patient records. The company's 2-year-old health-care software group is run by Peter Neupert, who led Drugstore.com before joining Microsoft for a second time in 2005.

Ballmer speaks today at the Healthcare Information and Management Systems Society conference taking place in New Orleans through March 1.

Ballmer, in a Feb. 15 meeting with analysts and investors, listed health-care software as an area that will provide growth for Microsoft, albeit several years out.

Ballmer will also announce that the company has won a contract, along with Dell Inc. and Allscripts Healthcare Solutions to set up an electronic health records network for the Louisiana State University Healthcare Network. The network is rebuilding after losing 250,000 medical charts and paper records during Hurricane Katrina.

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