NEW YORK -- Theglobe.com Inc., one of the most spectacular IPOs of the dot-com era, said it plans to shut down its Web-community offering and look to sell its game-related operations. It will cut about half of its remaining staff.
In an announcement made late Friday, the company said the move reflected the "continued significant decline" in the online-advertising sector. The company said the closing of the community site will significantly reduce liabilities and cash burn, preserving capital. The company said the community site contributed "disproportionately" to its operating losses.
"We are not in a position to sustain our online business operations in the long term and are now aggressively seeking a business combination or asset sale," said Chuck Peck, chief executive officer, in prepared remarks.
The company, which has never been profitable, was started by Stephan Paternot and Todd Krizelman in a Cornell University dorm room. Theglobe.com became the first superstar of the Web-stock boom, going public in 1998 with one of the biggest first-day price leaps in history. After its initial public offering was priced at $9 a share, theglobe.com began trading at $90.
But theglobe.com soon encountered competitive pressure. Its fiercest rivals, GeoCities Inc. and Tripod Inc., both were swallowed up by bigger companies with deep pockets and large audiences -- Yahoo Inc. and Lycos Inc. (now Terra Lycos Inc.), respectively.
Investors lost confidence in theglobe.com and its stock price plummeted back to the single digits. The co-founders resigned as co-chief executives in January 2000. Mr. Peck, formerly a senior vice president at the American Institute of Certified Public Accountants, was named CEO in July 2000.
Theglobe.com's stock continued to slide, however, and was delisted from the Nasdaq National Market in April 2001, after sinking below $1 a share. Friday, the shares were quoted on the OTC Bulletin Board at 13.5 cents apiece.
In the plans announced Friday, the company said it will close the www.theglobe.com community site and its small-business Web-hosting property www.webjump.com effective Aug. 15. It will also "significantly" scale down its online-games operations.
As a result of the cutbacks, 60 positions, or 49% of the company's remaining work force, will be eliminated. The company said its management is aggressively seeking to sell or merge its games properties, which include Happy Puppy, Kids Domain, Games Domain/Console Domain, Computer Games Online, and Chips&Bits, as well as leading print publication Computer Games Magazine.
Theglobe.com expects to incur a restructuring charge in third quarter reflecting employee severance, and property, plant and equipment and goodwill write-offs.
"Over the past twelve months, we have taken aggressive steps to position theglobe.com for a turnaround or business combination dependent on a rebound in the online advertising sector, but the sector remains severely depressed and there are few signs of a rebound in the near-term," said Mr. Peck.
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