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Athenahealth responds to hedge fund critic

Jonathan Bush was made for television. Or maybe it’s the other way around.

He was certainly in his element last week, cycling through the business news stations on cable and online with trademark high energy and plenty of edgy one-liners. But this time, Bush was in the rare position of playing defense, trying to explain why everything was just fine at athenahealth Inc., the Watertown health information company he runs.

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Bush was pushing back against an influential hedge fund manager, David Einhorn, who is well known for targeting companies he considers overvalued. Athenahealth stock has gotten clobbered recently, falling by 50 percent in just two months. Einhorn thinks it might plunge another 80 percent.

Bush won’t venture a guess about a fair price for athenahealth stock now. But he says value-oriented investors like Einhorn are fish out of water when they try to grasp high-growth companies willing to spend big to develop products for the future.

“He likes Apple now that Jobs is dead,” Bush told Bloomberg News.

This could get interesting.

Athenahealth isn’t just another little tech company with big dreams. It has emerged as the state’s star in the health information industry as the age of electronic medical records takes hold. Last fall, the company committed nearly $170 million to build out a corporate campus on a 29-acre cluster of brick buildings that predate the Civil War.

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Bush is the driving force behind athenahealth in ways few CEOs run public companies. He’s part of the famous Bush family — a cousin to W. — and a truly remarkable salesman. But his enthusiasm for athenahealth and its business borders on the kind of commercial evangelism that always makes me nervous.

“The company couldn’t be doing better, in my opinion,” Bush told me recently. “The size of the total market is so vast and the product is performing so well, there’s no reason we shouldn’t stop trying to grow at that pace.” That pace, by the way, is darned fast.

In many ways, athenahealth is developing an infrastructure to support the much bigger business Bush talks about. But the stock plunge, which shaved about $4 billion off the value of athenahealth shares in March and April, was certainly a sobering experience. The Einhorn broadside posed a much more direct question: How much there is really there?

Einhorn became famous after he pointed a critical finger at Lehman Brothers in 2008 — the same year the financial giant would go bankrupt. Ever since, Wall Street has paid close attention to everything the cofounder of the $10 billion Greenlight Capital Inc. says and does.

More recently, Einhorn targeted Keurig Green Mountain Inc., of Waterbury, Vt., and distributed a thick report making a case that the company behind the single-serve coffee revolution was much less than it appeared to be. Keurig’s shares plunged in 2012 but have since recovered to recoup their former value.

In a speech last week, Einhorn didn’t say anything nearly so critical about athenahealth or Bush. His basic message: Wall Street is putting much too high a value on the company and its business.

Athenahealth makes money by offering doctors and other health care providers a way to keep track of electronic records using the Internet cloud. Services that originally focused on billing have expanded to other forms of medical records.

That business has been booming and continues to grow fast. Revenues have increased at least 30 percent annually, year after year, and reached $595 million last year. The company reported profits of just $2.6 million in 2013, but its business operations actually generated more than $90 million of cash.

Bush says his company has chipped away just a small part of the potential medical market its products. But the boom in tech equipment to process medical equipment — driven by huge federal tax incentives a few years ago — means a much larger percentage of future sales will depend on replacing a client’s existing system.

Judy Hanover, research director for the technology research firm IDC Health Insights in Framingham, sees the overall market slowing down and a lot of companies still fighting for the business.

And how does anthenahealth’s business goal fit into that picture? “Thirty percent growth in that space seems like a lot right now,” Hanover says.

Athenahealth is a real Massachusetts business success story. It created products used by more than 50,000 customers and is rolling out new ones right now. But expectations for more hypergrowth as far as the eye can see deserve more than a few grains of salt.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.

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