Microsoft buys health Web search company

updated 9:21 p.m. ET Feb. 26, 2007

NEW YORK - Microsoft Corp. made its first foray Monday into the growing consumer health care market with its acquisition of Medstory, a closely held company that is developing an Internet search engine for health information.

Microsoft didn't reveal the purchase price. Chief Executive Steve Ballmer made the announcement of the acquisition during his keynote at the Health Information and Management Systems Society Conference in New Orleans Monday. He also announced The Connected Health Framework Architecture and Design Blueprint, the first in a series of guidance documents and tools Microsoft has created for health care providers.

The decision by Microsoft to enter the consumer health care market and participate more fully in the overall industry is part of a bigger strategy to diversify from its core product lines of Windows and Office, which make up 90 percent of its earnings, but are maturing markets with lower growth potential.

Microsoft has said in order to spark more growth, it needs to enter markets that will substantially expand. Earlier this month, Ballmer noted that consumer health care is an area where the company would be making upcoming announcements.

(MSNBC.com is a joint venture of Microsoft and NBC Universal News.)

Medstory, a closely held startup in Foster City, Calif., runs a free search site that provides results from the Web and from select health and medical sources.

"With Microsoft's reach and experience, I look forward to this soon becoming a standard for online searches of health information," said Dr. Alain Rappaport, chief executive and founder of Medstory, in a press release Monday.

The search technology should be incorporated into the fitness section of its main MSN Web site and other areas "in time," said Steve Shihadeh, general manager of Microsoft's health solutions group.

Overall, health-care costs are expected to make up about 20 percent of U.S. gross domestic product by the year 2015. The number of people seeking health care information on the Internet should expand substantially as aging baby boomers develop ailments associated with the senior years. Also seniors are among the fastest growing segment on the Internet.

"Medstory is a great first step" in the consumer health market, "expect more to come," Shihadeh said.

Shares of Microsoft rose 17 cents to close at $29.07 on the Nasdaq Stock Market. The software company is based in Redmond, Wash.

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