Two online CD stores, N2K and CDNow, are to merge. Both companies are losing money, and facing new competition from virtual bookstore Amazon.com.
The merged company will be called CDnow/N2K. One N2K share will be exchanged for 0.83 shares in the new company, while one CDnow share will equal one new share.
The merged company will have 460 employees and annual sales of $75 million. It will be headed by Jason Olim, chief executive of CDnow, as president and CEO, with N2K co-founder Jon Diamond serving as chairman.
By merging, the companies hope to cut costs. Both have been growing revenues fast, but are continuing to lose money heavily. N2K just reported a third quarter loss of $19.7 million on sales of $10.5 million. CD Now barely did better, reporting a third quarter loss of $12.8 million on revenue of $13.9 million.
On top of that, one of the highest profile Internet companies, online bookstore Amazon.com, recently added CDs to its offerings.
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