RealTime IT News

A Fate Worse Than Death

The U.S. Open is upon us, and tourists have descended on my sleepy little town like locusts. An unusual heat wave earlier this week sent northern Californians running for shade, but yesterday afternoon we were treated to a heaping dose of chilly London fog. Sounds like a terrific analogy for all the crazy weather we've been experiencing in the markets this summer.

It looks like CDNow made a boneheaded mistake of counting the proverbial chickens before they hatched. The music e-tailer prematurely announced it was close to narrowing down a laundry list of prospective merger partners earlier this month. But now there are indications that plans are starting to come unraveled.

Yesterday, the company said it may entertain offers below its current share price. That's bad news for day-trading bargain hunters who eagerly anticipated a bailout or buyout just around the bend. Apparently, the struggling jukebox is having terrible difficulties finding a reasonably interested party. Not surprisingly, that's in lockstep with a growing trend amongst failing Web companies of late.

We've seen a gaggle of going-out-of-business sales since the beginning of the millennium. And one thing that's prevalent, is many acquiring companies are choosing to remain idle and watch the mounting list of Web start-up implosions continue to unfold. The reason is pretty simple. Most disappearing dot-coms don't have anything an acquirer would actually want or need.

Rather than dig a bevy of me-too competitors out of holes and assume burdensome debt through merger or acquisition, some buyers would just as soon pile on another shovel-full to speed up the inevitable collapse. Take CDNow for example. Interested parties likely favor seeing the company go under completely to facilitate an easier time of picking through the ashes. Forget the brand. What assets? Buying a la carte makes a lot more sense to acquirers who only have a cursory interest in the company's customer list anyway.

That's been the rule of thumb with recent additions to the dot-com boneyard. Boo.com had to shut the lights before buzzards made short work of the online fashion retailer's scant assets. Same with eParties and Petstore.com. The list goes on and on, but the message is loud and clear. It's cheaper to pull the gold watch off a stiff.

There's not really a bidding war going on in the trenches amongst well-heeled rivals or brick-and-mortar buyers. He who has the gold makes the rules; and right now, the rule of the day is to simply sit back, watch and wait. An early consensus on the Street had predicted sweeping consolidation at bargain basement prices. But what's materialized instead is a game of limbo. How low can cash-needy Nets go? For patient deep-pocketed buyers, not low enough.

Any questions or comments, love letters or hate mail? As always, feel free to forward them to kblack@internet.com.

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