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Tale of 2 L.A.Tech Companies: One Down While Another Out

Tale of 2 L.A.Tech Companies: One Down While Another Out

Fading: Xdrive officials denied closure rumors.





By CLAUDIA PESCHIUTTA and SAMANTHA LEE

Staff Reporters

Having made it through the brutal rounds of the dot-com meltdown, one Westside Internet firm is leaving town and another could be on the ropes.

Internet advertising firm L90 Inc. announced on July 1 that it would buy the North American media sales business of DoubleClick Inc., a rival Internet advertising company, for $5 million in cash and 4.8 million shares of stock, change its name to MaxWorldwide, and move to New York.

Less clear is the fate of Xdrive, an Internet-based data storage service. Online news service Digital Coast Reporter reported last week it had shut down, and company officials were not returning calls seeking comment.

While Xdrive vendors and clients disputed the report, the company’s financial backers also were silent, either declining to comment or not returning calls.

Rumors about a closure, which have been circulating for months, are “simply unfounded,” according to Arthur Ekroos, executive vice president of Xdrive partner Rodopi Billing Software. “Sometimes companies remain quiet while they are going through a restructuring process,” he said.

Xdrive’s servers are still running and its checks have cleared, said Joe Steinberger, chief executive of Intertune LLC, creator of the firm’s Web site.

“Normally, when a company goes out of business, we start shopping their space around,” said Rick Matthews, a spokesman for Xdrive’s landlord, Trizec Properties Inc. “We are not shopping it around at this time.”

Holding on

L90 had been a player in the online advertising market, but a slump in ad sales hurt the business and accounting irregularities forced the termination of a merger agreement with L.A.-based eUniverse earlier this year.

The deal with DoubleClick is meant to shore up the firm’s move from technology and toward advertising.

Last year L90 sold off advertising technology assets to DoubleClick for $6.8 million in cash, ending its efforts to provide proprietary Internet ad serving, tracking and marketing technology.

Mitchell Cannold, who recently was appointed president and chief executive of MaxWorldwide, said that given the focus on advertising, it was natural to move L90’s headquarters to New York. “It’s basically a Madison Avenue-oriented business,” he said.

L90, which has nine offices throughout the U.S., plans to keep a facility and some senior sales people in L.A. Cannold said Los Angeles is “critical because the market is certainly growing here, in terms of online advertising.” Consolidation associated with the acquisition will result in some local layoffs in the next month or so, he said. L90 has 35 employees in L.A. and about 85 companywide.

Founded in 1999, Xdrive had a staff of 80 employees in March when it acquired FreeDrive Inc., a Chicago-based online storage company. The purchase price was not disclosed. Xdrive had expected the acquisition to broaden its reach to better compete with other storage providers, such as Yahoo Inc.

But its reliance on fee-based storage may have hurt. “It’s hard to justify why customers would pay for this,” said Victor Hwang, chief operating officer of Larta, a technology think tank.

The company had raised $140 million in venture capital through March but didn’t make it off the dot-com bubble unscathed. The company, which initially relied on advertising revenue, shifted to a membership model and trimmed staff to stay afloat.

Among its funding sources were VC firms eCompanies, WitSoundview Partners, Pilot House Associates and Baroda Ventures. Representatives of those companies did not return calls. Officials of Centre Partners, another source of funding, declined to comment on the company.

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