16% of Year's Dot-com Deaths Occurred Past 2 Weeks

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Report: 16% of Year's Dot-com Deaths Occurred Past 2 Weeks

By: Dick Kelsey Date: 11/16/00 Location: SAN FRANCISCO, CALIFORNIA, U.S.A,

Dot-not, who's there? About 130 fewer dot-coms today than there were on Jan. 1, according findings of a survey by Webmergers.com released today.

What's more, 21 of those dot-coms - 16 percent of the total for the year - went south in the first half of November. That number is one short of the October count, the highest monthly total of the year.

That report does not count today's shutdown of beauty industry services company BeautyJungle.com Inc. The company said it was forced to cease operations immediately due to a lack of funds. Thirty people are losing their jobs.

This month's other casualties include gardening products and information site Garden.com, e-grocer Streamline.com, pet supply site Pets.com, natural products e-tailer MotherNature.com and home decor site Furniture.com. All said they were forced to shut down by a lack of funds and no hope of financial relief.

Webmergers.com said 8,000 jobs were lost due to this year's closures; 75 percent of shuttered dot-coms were in the business-to-consumer (B2C) sector; 60 percent involved e-commerce companies.

The company said a doctor has a better chance at survival by implementing a merger-and-acquisition (M&A) plan before the money begins running out, adding that building an M&A strategy into its first business model wouldn't be a bad idea. After all, Webmergers said, venture capitalists have better things to do with their time than shopping companies. "Itís easier for them just to shut it down," the report said.

That's for sure, said Ron Klammer, managing director and president of OEM Capital Corp., a financial advising firm in Southport, Conn. "Everyone's looking at the sunrise over the mountain," Klammer told Newsbytes. "They (failed dot-coms) just become road kill and venture capitalists move on."

Klammer said plenty more dot-coms will go to the scrap heap, especially after the holiday buying season. Ego may be tied to the demise of many dot-coms, he said, because founders and CEOs are less inclined to let go of their own ideas because they often put passion before reason.

But there's never a single reason for a dot-com's demise, said Keith Werle, managing principal of Dotcom Ventures Inc., a consulting and advisory firm for new ventures. "It's a diabolical combination of things that conspire to keep the venture from succeeding," Werle told Newsbytes. The founder of a company "very rarely" is still in charge when the firm goes public, he said, noting two prominent exceptions - Bill Gates and Jeff Bezos, founders of Microsoft and Amazon.com, respectively.

Today brought further news of Internet sector layoffs, which have become more common in the past several months.

- Financial news site TheStreet.com will dismiss 20 percent of its workforce, close its UK operation, and phase out its joint-venture newsroom with The New York Times by the end of this month. TheStreet.com said the layoffs are part of a plan aimed at reaching profitability by the second half of 2001.

- Online encyclopedia Britannica.com says it's laying off 75 people, or 23 percent of the US workforce, in the next two weeks. Editorial, product development, marketing, e-commerce and technology positions were cut, the company said.

- Online audio distributor Audiohighway.com announced that 21 of its 30 employees are getting pink slips to reduce expenses as part of its plan to find new funding and partnerships. On Tuesday the company reported $3.2 million in third-quarter losses compared to a $2.8 million loss in the same quarter of 1999.

- Outdoor equipment and apparel retailer REI Inc. said 38 people have been laid off from its 600-employee headquarters. An unspecified number of those furloughs involved REI.com staff.

And on Monday, Internet consultant MarchFirst disclosed plans to lay off 1,000 "underutilized" consultants using "outdated technologies" to save $100 million annually.

John Challenger, chairman of outplacement firm Challenger, Gray & Christmas, said he expects the dot-com shakeout to be most active during November, December and January. His firm, which keeps track of layoffs and other personnel changes nationwide, said the furlough rate rose 18 percent in October over the previous month.

Last March 20, just as the tech stock freefall was picking up speed, Pegasus Research International Inc. predicted that dozens of then-high-flying e-commerce sites could be killed off by "digital Darwinism" within one year. And in April, a Forrester Research report went even farther, predicting that "most" dot-com retailers would see the reaper beckoning before Christmas' arrival.

Reported by Newsbytes.com, http://www.newsbytes.com


-- Martin Thompson (mthom1927@aol.com), November 17, 2000

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