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CDNow stumbles in 1Q
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May 2, 2000: 6:32 p.m. ET
Cash-crunched Internet music retailer misses earnings by 4 cents
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NEW YORK (CNNfn) - Beleaguered online music retailer CDNow on Tuesday reported a wider-than-expected first-quarter operating loss, as the company continues its search for a merger partner or investor to help it out of a severe cash crunch.
Excluding one-time items, CDNow lost $28.2 million, or 92 cents per share, during the period ended March 31. Analysts polled by earnings tracker First Call had expected the company to lose 88 cents per share during the quarter.
Including acquisition-related and other one-time charges, the company's net loss for the quarter was $37.8 million, or $1.23 per share. That's compared with a loss of $19.1 million, or 96 cents per share, during the same period a year ago.
Shares of CDNow, which have been dangling near a 52-week low of 3, slipped 7/16 to 4-3/16 in light-volume Nasdaq trade Tuesday.
 The company's stock has been battered in recent months after its accountants in March questioned the Fort Washington, Pa.-based company's ability to continue as a going concern.
Those doubts were based on the company's recurring losses from operations, a shortage of working capital and significant payments due in 2000 related to marketing agreements.
Analysts have said that the company has lost the power to dictate its future, and executives have been looking for a deeper-pocketed ally to help them through the cash crunch.
"These results demonstrate the strong inherent value in the CDNow brand as we continue to aggressively seek a merger partner or investor," Jason Olim, the company's president and chief executive, said in a statement Tuesday.
"Moving forward, we have recalibrated our business to conserve resources and allow us to move more quickly to profitability," Olim added.
Executives laid out a new operating plan under which they expect to cut more than $12 million out of their operating expenses per quarter.
They said they will do so by: reducing the cost of acquiring new customers as much as 50 percent by eliminating the least efficient marketing spending and pursuing more productive customer acquisition initiatives; increasing advertising revenue as a percentage of total revenue; and increasing the value of new and existing customers.
At the same time, however, they expect both revenue and the rate of acquisition of new customers for the second and third quarters to fall below the first quarter's levels.
However, executives said they do not expect revenue to fall as significantly as the reduction in spending. 
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