Egghead.com to File for Bankruptcy, Sell Web Site

By Michael Liedtke The Associated Press Published: Aug 15, 2001

SAN FRANCISCO (AP) - Online technology merchant Egghead.com Inc. on Wednesday joined the procession of unprofitable Internet businesses limping into bankruptcy court. As part of its plan to file for Chapter 11 bankruptcy protection, Menlo Park-based Egghead said it would sell its Web site and other related assets to Fry's Electronics, a popular chain that has grown from a single store in the Silicon Valley 16 years ago to 18 stores spread through California, Texas, Arizona, and Oregon.

The Egghead assets that aren't bought by San Jose-based Fry's will be sold under the bankruptcy court's supervision, the company said.

With the decision to wind down its operations, Egghead laid off 185 employees in Menlo Park and Vancouver, Wash. The 59 percent cutback left Egghead with 130 employees, down from more than 500 five months ago.

The company had been taking other extreme measures to survive.

Besides laying off workers, Egghead pared its operating expenses in the first quarter, down 49 percent from the same time last year, and in April subleased half its 50,000-square-foot headquarters for an annual take of $1.4 million.

But it wasn't enough to save a company that has lost more than $345 million since its inception in 1994 as a technology products auction site called Onsale.com. The company changed its name and entered the retail business in 1999 when it bought Egghead.

Egghead is just the latest high-profile Internet business to land in bankruptcy court in the last four months.

Since April, prominent Web sites Quokka Sports and Webvan have taken the bankruptcy route, along with wireless Internet provider Metricom Inc. and high-speed Internet access providers Covad Communications Inc. and Rhythms NetConnections Inc.

Like many failed Internet companies, Egghead's potential once enchanted Wall Street.

The stock once traded above $100 per share. On Wednesday it fell 1 cent to close at 30 cents on the Nasdaq Stock Market. The shares have been in a funk so long that Nasdaq warned Egghead in April that it might be delisted.

Egghead had built one of the Internet's biggest commerce sites by retailing and auctioning more than 75,000 items - mostly computers, technology gadgets and office supplies - to 3.8 million registered customers. The company's annual revenues peaked at $541 million in 1999 before falling to $479 million last year. The sales erosion continued through the first half of this year, as revenue plunged 48 percent to $136 million, leading an $12.8 million loss that left Egghead with $4.6 million in cash as of June 30.

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On The Net:

http://www.egghead.com

AP-ES-08-15-01 1904EDT

-- Anonymous, August 15, 2001