10 Tech Companies That Totally Imploded

Naveen Jain, the founder of InfoSpace, found himself in legal trouble as the company floundered. © Tobias Hase/dpa/Corbis

This last one's a little awkward. Today, InfoSpace is part of Blucora, which announced that it was acquiring HowStuffWorks on April 21, 2014. So, this one feels like airing out the family's dirty laundry ... but InfoSpace's 2002 implosion was too dramatic to ignore.

InfoSpace, founded in 1996 by former Microsoft employee Naveen Jain, provided a variety of Web-based content and services including phone directories, weather information, stock quotes and search engines. It first made money from ad fees and then made a foray into providing cell phone Web content, intending to make money through charges to cellular customers. Wall Street analysts spoke highly of the company, and it was often touted as the next Microsoft. At its peak in early 2000, InfoSpace stock was worth more than $1,000 a share. It dropped drastically after the dot-com bubble burst, but even a year after the crash, its stock fluctuated at respectable levels above the initial offering price of $15, unlike the pennies of many failing companies.

But it turned out that the company's worth may have mostly been smoke and mirrors. InfoSpace apparently used accounting tricks and shady business deals to mislead investors and analysts into thinking it was doing better than it really was, while many of its executives were dumping their own stock [source: Heath and Chan]. That's where InfoSpace's story diverges from most of our other tech company implosions: Insider trading and other nefarious activity were going on behind the scenes.

After revelations emerged of how the company was really doing, its stock plummeted to just a little more than $2.50 a share in June 2002, wiping out a lot of investors and making employee stock options worthless. Microsoft co-founder Paul Allen lost hundreds of millions of dollars because of his investment in Go2Net, which had merged with InfoSpace in October 2000 [source: Heath and Chan]. Despite all the apparent wrongdoing, no one went to jail. There were lawsuits over the insider trading, one of which Jain lost, but the judgment against him was drastically reduced on appeal. Court records were sealed by the presiding judge.

InfoSpace underwent a total housecleaning and restructuring starting in December 2002, when the board of directors terminated Jain as chairman and CEO, replacing him with Jim Voelker. It sprang back and became profitable under new leadership and after divesting itself of many of its businesses. In its new form, InfoSpace is still around as part of Blucora, providing search and monetization services.

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