Augusta Georgia: Sci-Tech News from the Associated Press

Associated Press
Last Update: December 09, 19:58 ET

SAN FRANCISCO -- Internet music company Liquid Audio may sell or liquidate its assets now that its board of directors has voted unanimously in favor of a $57 million stockholder cash payout, the company's chief executive confirmed Monday.

Under the approved cash distribution, shareholders of record on Tuesday will receive $2.50 per share on Dec. 20, the company announced Friday. Liquid Audio makes software and provides a proprietary method for delivering music over the Internet.

Liquid Audio's chief executive, Ray Doig, said the dissolution of cash does not mean that any immediate changes will occur at the company and the digital music services it provides will continue -- at least for the near future. Doig said he would like to sell the company as a whole rather than merely shed portions of its assets to the highest bidder.

"I would prefer a retail sale of the company for the highest value we could get for our shareholders,'' Doig said.

"Until we have a clear path as which way is best to go for the shareholders, it's business as usual,'' he said. "We're not under any financial pressure to turn the lights off.''

But the lights have certainly dimmed for Liquid Audio in the last tumultuous year. After the latest failed mergers last month, the company's co-founders, Gerry Kearby and Robert Flynn, both resigned. And following a spate of recent layoffs the company has only about 30 employees remaining.

Liquid Audio sued two dissident shareholders, including MM Companies Inc., for allegedly violating federal securities laws in their efforts to block the online music company's planned merger with media distributor Alliance Entertainment Corp.

The merger died last month and two MM Companies executives now sit on Liquid Audio's board of directors.

Liquid Audio's suit against MM Companies has been dropped, Doig said.

Jupiter Research analyst Lee Black says Liquid Audio, though limping, may still have some appeal as an Internet music provider.

"They've still got some business relations out there that could be worth something to someone,'' Black said. "They're a player and a distributor of digital downloads. It depends on who is going to see value in that. Are they done as a company? Maybe. Are they done as a brand? Maybe not.''

Black said Liquid Audio didn't have enough top shelf music content early enough to lure people away from the unprotected and wildly popular MP3 format. As legitimate online music services struggle for attention, free MP3 music files continue to rule on the Internet.

"The business and the consumers moved in a direction that didn't tend to take Liquid Audio with it,'' Black said.

Shares of Liquid Audio fell 2 cents Monday to close at $2.76 on the Nasdaq Stock Market.

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On the Net:

http://www.liquidaudio.com