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Peapod: Getting Pointcasted

On November 5, 1999, I wrote an article about "First Mover Disadvantage." Basically, I talked about how being a first-mover is no guarantee of success. Actually, the first-mover may be too early.

A classic example is Peapod (PPOD) , the first online grocery store. Even though the grocery market is huge, the fact remains that margins are razor thin. The result has been disaster for Peapod.

In my November column, I wrote: "Thus, at $15 per share, Peapod is no bargain. It could easily go lower and lower." And it has.

Yesterday, the stock collapsed. The stock price plunged $4-3/32 to $3-23/32.

I consider the situation similar to Pointcast. Pointcast was the darling of Silicon Valley several years ago. The company had devised an exotic technology known as "push," in which content was distributed to desktops using a screen saver. It was cool. It was a first mover. It imploded. The company was sold for scrap last year.

As for Peapod, it has been Pointcasted. Again, even at current prices, Peapod is still no bargain.

Yesterday, the CEO, Bill Malloy, resigned from the company (he cited health reasons). He has been CEO only since September 1999. What's more, the letters of intent to raise $120 million for Peapod have been nixed. There is a mere $3 million in the bank account. The investment banking firm of Wasserstein Perrella & Co. Inc., has been hired to "explore strategic alternatives."

Add to this the fact that investors have been negative on the e-tailing sector. The online grocery space is also very competitive -- Webvan, NetGrocer and HomeGrocer.com have substantial resources.

All in all, Peapod is headed for quick extinction. Remember, in the event of a bankruptcy, it is the shareholders who are last in line to collect proceeds from a liquidation. Peapod should definitely not be on investors' shopping list.