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News > Technology
More dot.coms hit skids
November 16, 2000: 2:22 p.m. ET

At least 130 Internet firms have gone out of business since January, study says
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NEW YORK (CNNfn) - At least 130 Internet companies have shut down so far this year, according to a new study by Webmergers.com, a Web site that tracks merger and acquisition trends among Web companies.

Dot.com closures have accelerated in November, with 21 companies closing up shop in the first half of the month. That compares with 22 shutdowns for the entire month of October, which was the highest month to date, Webmergers said. Webmergers compiled its shutdown data from more than 50 public and private information sources.

Nearly 100 of the shutdowns involved companies that address primarily a consumer audience. However, B2B companies were not immune, with 26 of them folding their tents, the study found.

"E-commerce players, some of them unprepared to face a grueling holiday buying season, accounted for about 60 percent of all the shutdowns. Content properties made up another quarter of the total," Webmergers said.

About 8,000 employees lost their jobs as a result of the company closures, according to Webmergers.com's estimates. Figures from the human resources consulting firm Challenger Gray & Christmas Inc. show a much higher level of dot.com job losses, however.

graphicChallenger Gray released a report last October saying that about 22,267 dot.com cuts have been announced since December 1999, when the firm began tracking such data. Of the 274 companies tracked from December 1999 through October 2000, 44 of them -- or 16 percent of the total -- have since failed.

High-technology corridors naturally bore the brunt of the job losses, Webmergers said. Nearly 35 percent of the shutdowns were in the state of California. New York accounted for 11 percent of the implosions, while European companies made up 8 percent of the total.

Recent high-profile Web company failures include pet supplies e-tailer Pets.com, drug retailer More.com, online fashion store Boo.com, online price-comparison service Productopia.com, cosmetics and beauty aids seller Eve.com, online vitamin store MotherNature.com, and gardening products retailer Garden.com.

Many other Web-related companies that remain in business have announced substantial job cuts to trim their expenses and conserve cash. Companies shedding dozens of workers over the past month included Stamps.com, Drugstore.com, Net Perceptions, Razorfish, Internet Pictures, FreeRide.com, and MyPoints -- to name a few.

In fact, on Thursday online financial information company TheStreet.com Inc. announced plans to cut its work force by 20 percent and close down its operations in the United Kingdom.

Webmergers listed some reasons why Web companies have been forced to shut their doors instead of finding a merger partner. They included:

  • There's no there there. Some Internet companies simply don't have a sustainable business model. Others simply have not yet built up assets of value such as a strong team, proprietary technology, customer lists, intellectual property, brand or domain names or other assets.
  • Many of the failed companies were awaiting second- or third-round funding that appeared to be just around the corner. By the time they realized their investors had fled, they were already facing shutdown.
  • They waited too long. Some companies began trying to sell themselves after cash began to run out. In that desperate condition, they lost all leverage with buyers.
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