Egghead Declares Bankruptcy

Egghead.com Inc. Wednesday declared Chapter 11 bankruptcy and laid off 200 employees. The online computer and electronics retailer failed to survive in the unfriendly environment of weak consumer computer sales and wary Wall Street investors.

The Menlo Park, Calif., retailer will sell its domain name and other unspecified assets to brick-and-mortar retailer Fry's Electronics Inc., according to a company statement. Fry's will continue to operate the E-commerce Web site under the Egghead brand.

"We regret having to take this action, which was forced on us in recent weeks by a dramatic and unexpected decline in sales," said Egghead.com president and CEO Jeff Sheahan in the company statement. "That made it impossible to reach profitability in the fourth quarter. We investigated a number of alternatives, and were pleased with Fry's offer to purchase the assets of the company and continue running the business, as the Egghead brand name is a strong and vibrant one."

In addition to the lack of both funding and customers, increased competition furthered Egghead's demise, according to Ken Cassar, Jupiter Research senior analyst. At one time, he says, Egghead was the leader of distressed computers and customer electronics, as failing companies liquidated their computer assets with the Egghead site. "But over the past year or so, Overstock.com has emerged as a real competitor."

Gartner research director Rob Labatt says that "in light of the severe churn-down in customer electronics demand," he isn't surprised by the news.

Egghead stock Wednesday fell from 33 cents per share to 3 cents per share, before trading was halted mid-day. Due to the low share price, the company had been in talks with Nasdaq to prevent being delisted from the stock exchange.