CDNOW STILL ALIVE… FOR NOW

After reaching an all-time trading low on the Nasdaq, shares of CDNow made a slight rebound on Thursday, closing at $3.81, up 8.93 percent—this in contrast to the stock's two-month high on July 12 of $23.27.

A month's worth of bad press has taken its toll on CDNow's stock. First, the company's merger agreement with Columbia House fell through. (Although, Time Warner and Sony—who jointly own Columbia House—are working to find ways to improve its "declining operating performance," despite its status as the top U.S. music and video retail club.) Then, earlier this week, auditor Arthur Andersen expressed his doubt that the company would survive through the end of the year.

"I have every confidence we will be able to find someone who wants to fund us," said CDNow President and CEO Jason Olim, who admitted that his company's need for a major partner with deep pockets was essential.

Ironically, CDNow ranks consistently in the top 50 most-visited sites on the Internet and has more than 8 million unique users who spend an average of 42 minutes on the site.

"Pure play online music retailers are basically seeing the end of days," said analyst Aram Sinnerich. "There's no (profit) margin on the sale, and the companies are not converting customer data and not expanding into higher margin goods. They're wasting time and money, and I think that the investment community is starting to pick up on that."