Q1 Shutdowns and Bankruptcies Decline

Internet research firm Webmergers.com issued its first quarter report on Internet shutdowns this week and it appears that the bankruptcy rampage that brought down a significant percentage of the technology industry this time last year, fell sharply by two-thirds.

San Francisco, Calif.-based Webmergers acquires its information by tracking published and personal sources on mergers, acquisitions, bankruptcies, and shutdowns of major Internet companies around the world that are funded by venture capitalists or angel investors.

According to the Webmergers report, in the first two months of this year, a total of 37 Internet companies out of an estimated 7-10,000 global Internet entities, shut down or declared bankruptcy, compared with 115 during the same period last year.

The year before that, only ten companies shuttered their doors, which indicates a level of normalcy beginning to take effect.

All totaled for the first quarter of 2002, 57 companies went under, measuring out to only one third of the 164 companies that shuttered their doors in the previous year’s first quarter. March saw 17 shutdowns, compared with 18 in February, and 19 in January, marking a gradual decrease in distressed companies and a record low since August 2000.

Company failures for the month of March were spread evenly across all corners of the industry, says Webmergers, affecting infrastructure companies, e-commerce, and content companies alike.

The shakeout in the telecommunication sector continued to take its toll in the first quarter with Adelphia and Yipes Communications filing for Chapter 11 protection. Web hosting firms Globix Corp. and Verado Holdings filed for Chapter 11 in February, and in the business-to-consumer sector, consumer electronics e-tailer 800.com failed to secure a sixth round of funding and was forced to go under, selling its customer names and URL to Circuit City, according to Webmergers.

Optical networking companies Cinta Networks and OptiMight Communications shuttered their doors. Content management software company Webforia filed for Chapter 7, and New York University shut down its e-learning venture NYUonline.

However, the most notable corporate stumble this year was Global Crossing and its January Chapter 11 filing.

Other noteworthy shutdowns included video e-tailer BigStar Entertainment and Garageband, a music download site.

At an international level, Shop.cz, a veteran e-tailer in the Czech Republic called it quits this year alongside India-based information and community Web portal Itspace.com.

To date, Webmergers has recorded the closure of 823 Internet companies since January 2000, the majority of which went bust during the first and second quarters of 2001 and peaked in May, 2001 with a record 64 closures in one single month.