Election Section

Report: Dot-com death toll doubles in 2001

By Michael Liedtke AP Business Writer
Friday December 28, 2001

At least 537 Internet companies out of business or bankrupt 


SAN FRANCISCO – The dot-com death toll doubled this year, with at least 537 Internet companies either going out of business or seeking refuge in bankruptcy court, according to statistics released Thursday. 

This year’s casualties joined 225 dot-coms that perished during 2000, said Webmergers.com, a San Francisco-based deal maker that has tracked the rise and fall of the Internet economy. 

But the worst may be over. 

Only 21 Internet companies have failed in each of the past two months, the lowest mortality rate since 10 dot-coms failed in August 2000. 

The recent dropoff has prompted some observers to conclude that most dot-coms have already been wiped out, but Webmergers said that perception is wrong. 

The site estimates that 7,000 to 10,000 Internet companies remain in operation. That means the financial devastation of the past two years claimed no more than 10 percent of the sector, leaving behind a stronger – and possibly wiser – group of survivors. 

“To say that the decline in shutdowns is because there are no dot-coms left is a bit like saying a decline in rabies rates is due to the fact that all the dogs are dead,” Webmergers said in its analysis. 

The dot-com wipeout triggered a tidal wave of layoffs, including cuts made by Internet companies trying to weather the storm by pruning expenses. 

Through November, dot-com companies had announced a total of 98,522 layoffs, more than doubling the 41,515 firings that were made in 2000, according to Challenger, Gray & Christmas Inc., a job-locating firm in Chicago. The firm plans to announce year-end totals Monday. 

Dot-com layoffs also are tapering off. In November, Internet companies announced 2,901 job cuts, down dramatically from the peak of 17,554 layoffs announced in April. 

California, home to the technology-rich Silicon Valley, sustained the most dot-com damage in the past year. Since January 2000, 227 Internet companies based in California have closed or filed for bankruptcy, accounting for 30 percent of the nationwide total during that period, Webmergers said. New York, home to Silicon Alley, ranked next with 75 dot-com failures during the past two years.