Debacle at inChorus.com Results in New Focus

Rich media e-mail marketer inChorus.com has a new chief executive, following
the departure of William Yuan from the troubled company’s management.

Yuan, who also held the title of president at the Burbank, Calif.
company, is now the national sales director at the rich media e-mail
division of CyberCenters, a recently acquired subsidiary. Yuan also vacated
his position on the inChorus’ board of directors, the firm said.

Stepping into Yuan’s place as CEO and president will be Thomas “Bud”
Yoakum, a former executive at Scholastic Media, Dun & Bradstreet and Farmers
Insurance Group who joined the company months earlier as a member of the
board.

Yoakum clearly has his work cut out for him, readily admitting that the
firm, which creates tools for marketers to embed animation and sound into
e-mail messages, continues to have problems.

“I underestimated the task at hand several months ago when I first looked
at the company,” Yoakum said. “At that time it was clear that inChorus.com
was a few days if not hours away from having to file Chapter 11 Bankruptcy.”

That’s not surprising: industry watchers had speculated about inChorus’
chances for survival since it announced it was laying off all but six
executives in December.

Yet new CEO Yoakum maintains there’s reason for hope, in the form of the
company’s new CyberCenters subsidiary. The unit creates brick and mortar
service bureaus for walk-in B2B clients to create and distribute rich-media
e-mail campaigns.

“While the [financial] situation is still not completely resolved, a
number of positive actions to date have been taken and I now believe that
with dedication and fiscal discipline we can move inChorus.com to become a
highly successful company,” he said. “Our immediate attention will be on
building a national organization for the sale and licensing of the
CyberCenters.”

Yoakum said the company’s new concentration of its business on
CyberCenters would necessitate a name change, new hiring, additional
capital, and a further restructuring of existing resources.

At any rate, the new focus on the CyberCenters, the new CEO and the
persistent optimism of company executives, despite serious fiscal woes,
marks a new stage in the company’s short, strange history.

In December, company SEC filings revealed that the company — then
located in Santa Clara, Calif. — had cut its last 12 non-executive
positions, citing a “continued severe capital shortfall.” The company had
been gradually laying off for the previous several months. In regulatory
filings at the time, the company said it had cut 26 of its 32 positions to
bring operating expenses “more in line with revenues.”

But revenues weren’t the only worry for the startup. In April 1999, the
SEC began an investigation into inChorus, then known as Softlink Inc.,
about a series of alleged shareholder violations. The SEC sought to
determine whether inChorus made misleading statements regarding projected
financial revenues, engaged in inside trading, or neglected to publicly
register the sale of securities.

By January, the situation looked somewhat less grim. The company said it
had entered into in talks for either an exclusive licensing agreement with
or acquisition of online music broadcaster CyberRadio.com. inChorus didn’t
disclose how it planned to acquire CyberRadio, and indeed, revealed little
at all about the talks between the two firms.

Yuan said at the time that inChorus saw CyberRadio’s affiliated artists
(through a promotional subsidiary) and distribution network (it powers about
16,000 online radio stations, and streams the content of terrestrial
stations) as a way to create a “bold, new and more diverse future” for
inChorus.

But much of that plan was scrapped in March, when the company experienced
a management shakeup that saw the chief financial officer and two of three
board members resign. Yuan, the remaining board member, was soon joined by
the additions of Yoakum and Jay Scowden — a former lead singer of the 60’s
group Jay and the Americans and now Phoenix-area businessman.

Instead, the company then said it planned to relocate to CyberRadio’s
headquarters in Fountain Hills, Ariz. A merger with CyberRadio — and
integration into the company’s CyberCenter division — seemed eminent for
the firm.

However, that plan eventually fell by the wayside as well, as inChorus in
April reorganized as a holding company in Burbank under the direction of
Yoakum and Scowden. And despite Yuan’s earlier claims about the far-ranging
benefits of a future distribution relationship with CyberRadio, inChorus’
new management wound up purchasing only CyberRadio’s CyberCenters for an
undisclosed amount. (Scowden had licensed a CyberCenter himself in
January.)

From its new headquarters in Burbank, inChorus said that the CyberCenters
acquisition would be just “the first of many targeted companies and products
to be merged, purchased and/or licensed in the near future.”

Despite the lofty assertions, however, the company’s future remains in
doubt — not counting the immediate financial difficulties.

For one thing, inChorus’ strategy of pairing its e-mail marketing
technology practice into a business of franchising real-world, Kinko’s-like
service bureaus naturally requires sizable acceptance from local licensors.
And whether local business people would be willing to put their money into
such a venture — at a time when e-mail marketing, like the rest of the
battered Internet ad sector, has produced slowing revenues of late —
appears, at the very least, uncertain.

Nevertheless, Yoakum remains optimistic, saying he believes the new
acquisition of CyberCenters would boost revenue for inChorus and would
provide a source of capital for future acquisitions.

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