Company's shares continue to fall

The kids are all right, but is MusicMaker.com?

The Reston, Va.-based Web site specializing in customizable CDs and digital music downloads will distribute the Who’s next album, “The Blues to the Bush,” over the Internet. The company will also sponsor the group’s American tour this summer.

But even with this big-ticket news, MusicMaker.com’s stock price continued its slide on Wall Street.

Shares closed down almost 6%, at $3.53, the day after the company hit its all-time trading low Monday at $3.50. MusicMaker reached its trading high of $28.13 on July 7, 1999 — the day of its IPO.

The Who deal seemingly can’t counteract a week of bad news for the company. On April 5 MusicMaker released its annual report, revealing that the company incurred a net loss of $26.6 million during 1999, up from a net loss of $4.7 million in 1998.

In addition, an Oklahoma City-based law film filed a securities class-action suit Monday against MusicMaker.com alleging that company execs issued statements that bumped the stock to artificially inflated prices.

(As an example, the complaint alleges that the licensing deal MusicMaker.com signed with Virgin/EMI could not provide the financial gain for the company that was implied to its stockholders.)

Future unclear

Larry Lieberman, president of global marketing for the company, said the lawsuit was without merit and that MusicMaker.com has retained counsel to represent it in the matter.

As for the stock slide, Lieberman said it’s an understandable dip given the competitive environment of the online music industry.

“I think we’re in a pretty challenging sector at the moment, and there’s certainly other folks in our space that are having a tough time,” he said. “But the marketing activities that we’re doing this summer will help bring value to the company.”

Lieberman said MusicMaker.com is about to undertake a promotional deal with Pepsi that he expects will bring in from 3 million to 5 million orders for customizable CDs. In addition, the company is about to start a print advertising campaign targeting classical music and jazz aficionados.

MusicMaker.com was incorporated in April 1996 after it was founded by Robert Bernardi, co-founder of PictureTel and TranSwitch; Raju Puthukarai, former prexy of RCA/BMG Music and Video Club and prexy of Warner Music Media; and Irwin Steinberg, former chairman and CEO of Polygram Records, USA.

The three founders are named as defendants in the class action suit alongside MusicMaker.com, the EMI Group, EMI Recorded Music, EMI Recorded Music North America and board of directors members Jay Samit, Jonathan A.B. Smith and John A. Skolas.

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