NetObjects Bows Out

The notice was short, though not exactly sweet: "NetObjects, Inc. today announced that it will cease operations effective today. The Company intends to sell its assets as expeditiously as circumstances permit."

The Redwood City-based Web development toolmaker issued the announcement over the Labor Day weekend. Almost immediately, attempts to contact officials were met with unanswered phones. Needless to say, no company spokesperson could be reached for details of the decision.

Nonetheless, the announcement wasn’t much of a surprise to most observers. After a disastrous third quarter, in which revenues dipped by more than $6 million compared to the corresponding period last year, NetObjects was "delisted" from NASDAQ because, the company said at the time, it was unable to meet the exchange’s listing requirements.

In March of last year—just 18 months past—the company reached its 52-week trading high of $45.69 per share. By the time it was dropped from the NASDAQ, its shares were trading for 28 cents. In August, the company announced that its liabilities (about $7.8 million) exceeded its assets (about $6.6 million) when it filed its third-quarter financial results. At the time, the company said that it had $4.4 million in cash and cash equivalents, but lacked sufficient funds to continue operations through its next quarter. In that announcement, the company said that it would consider "extraordinary measures to conserve corporate capital." At press time, no offers for the company seemed to be forthcoming.

NetObjects is the creator of the Fusion line of Web-site development products. According to the analyst firm Butler Group, Fusion, which targeted the small and medium-sized business market, has been used to construct millions of business Web sites. The closure of the company leaves an estimated five million users without support.

Tim Jennings, a Butler group analyst, said the state of the Web-hosting market "may well have contributed to the downfall of NetObjects." Jennings says NetObjects faced increasing competition recently, mainly from Microsoft’s FrontPage. In a failed attempt to broaden its revenue stream the company developed NetObjects Matrix, a tool designed to be offered as part of a Web-hosting package.

Hope for Fusion users may lie in NetObjects’ alliance strategy. To keep up with demand for its products, the company partnered with companies like IBM and EarthLink. IBM owns a 48 percent take in NetObjects. There was some speculation this week that one of the company's major partners will continue to support the tool. No one at IBM or Earthlink would confirm or deny the speculation as of presstime, though observers did say Net Objects hired a merger and acquisitions adviser to explore strategic alternatives.

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About the Author

John K. Waters is a freelance writer based in Silicon Valley. He can be reached at [email protected].