Two Alley companies with a history of animosity are locked in negotiations over a merger deal that could end the dog-eat-dog competition in the instant-delivery space.

Officials at Kozmo.com and UrbanFetch are not denying reports that the one-hour delivery rivals are locked in high-stakes acquisition talks. Online publications reported that an announcement on Kozmo's buyout of UrbanFetch could be made as early as next week and that Credit Suisse First Boston is handling the deal for Kozmo.

Kozmo's spokesman, Matt Higgins, sidestepped queries this morning. "We do not comment on rumours," Higgins said. UrbanFetch also had the same response to atNewYork's queries.

Kozmo made headlines earlier this week when it canned 275 employees and shut the doors at two distribution centers in Los Angeles. The cutbacks represented about 10 percent of Kozmo's staff. With its IPO on hold, the latest move is seen as another attempt by the start-up to prove to would-be investors that it is not just a cash-burning machine. Four months ago, 24 employees from Kozmo's New York headquarters were sent packing in the name of streamlining operations.

Kozmo and UrbanFetch have been at each other's throats ever since competition got heated over the delivery business. Both companies deliver commodities such as cell phones, CDs, books, snacks and office supplies and in highly-publicised litigation action, there were lawsuits and countersuits over allegations that UrbanFetch stole Kozmo's business plans. The matter was settled last November. Settlement details were kept underwraps.

Just last month, in an interview with atNewYork, UrbanFetch's CEO Ross Stevens denied the company was up for sale. "Nothing is out of the ordinary at UrbanFetch," Stevens said on July 18th.

In June, UrbanFetch secured a total of $70 million in venture capital funding while Kozmo.com raised $250 million in funding, including $60 million from online retail giant Amazon.com. Kozmo is backed by Flatiron Partners, Oak Investment Partners Chase Capital Partners, J.W. Seligman & Co, Inc. and the Hambrecht & Quist Group.

Kozmo, citing SEC rules, refused comment on its financial situation. But, Kozmo's registration filing showed massive spending and scant revenue typical of fast-growth Internet companies. In 1999, Kozmo took in $3.5 million but recorded net losses of more than $26 million. All told, it has accumulated a deficit of $27.3 million and the SEC filing basically admitted that the losses will get wider as Kozmo expands its operations to more cities.

Kozmo.com is headquartered in New York City and currently services New York, Boston, San Francisco, Los Angeles, Seattle, Chicago, Atlanta, Washington, D.C., Portland and Houston. UrbanFetch vends it services in New York and London.