CDnow: Harbinger of E-Commerce Doom?
The online music retailer CDnow is in jeopardy, and some are speculating that its troubles augur poorly for e-retailing as a whole. As the New York Times' Matt Richtel reported, CDnow's stock fell nearly a third after an audit it filed with the Securities and Exchange Commission "expressed 'substantial doubt' about the future of the company." It seems that the company only has enough cash to keep it going through September 30.
As both the Times and CBS MarketWatch reported, CDnow's downward trend became clearer last month, when a proposed merger with the Time Warner- and Sony-owned Columbia House fell through. Since then, Reuters reported, the company has announced plans to cut costs by almost a third. Reuters quoted a CDnow statement: "We are finalizing our new budget now, and fully expect our plan will demonstrate the savings."
While several outlets reported the story, Richtel's piece was among the most analytical, implying that CDnow is the first victim of the long-dreaded e-commerce shakeout. "The struggles of CDnow appear to be a painful harbinger for online retailers, analysts said, because CDnow failed to achieve profitability despite being early to market and establishing a strong brand name - assets that popular wisdom has long equated with success in e-commerce." Richtel's sources suggested that the company's best hope is a takeover. As long as bigger companies have money to burn on smaller, failing ones, the shakeout may just have to wait. - Michelle Goldberg
That Was CDnow, This Is Then http://www.thestandard.com/article/display/0,1151,13462,00.html?nl=mg
Auditor Has 'Substantial Doubt' Over Future of CDnow http://www.nytimes.com/library/tech/00/03/biztech/articles/30net.html (Registration required.)
CDnow Comments on Reports of Cash Position (Reuters) http://www.mercurycenter.com/svtech/news/breaking/internet/docs/370892l.htm
CDnow Says It's Cutting Costs http://cbs.marketwatch.com/news/current/cdnw.htx?source=htx/http2_mw
Auditor: CDNotNow http://www.nypost.com/business/27293.htm