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Microworkz is closed, chairman confirms

The controversial discount PC provider that is being pursued in various consumer-related lawsuits is now out of business, company chairman Rick Latman says, and it likely won't be coming back.

It's official--PC start-up Microworkz is toast.

The controversial discount PC provider that is being pursued in various consumer-related lawsuits has gone out of business, company chairman Rick Latman said today, and it likely won't be coming back.

"Microworkz is in fact closed," he said.

The remainder of the company is now being managed by a group of attorneys, whom Latman refused to identify. As reported yesterday, the company had already ceased operations, the latest sign that the "free PC" movement has run into serious trouble.

Creditors and customers will likely become the chief victims in the collapse. "There are not a whole lot of assets. I don't see that creditors are going to get a lot," Latman said.

Sources at the company earlier stated that Microworkz was trying to sell the intellectual property behind the iToaster, an Internet appliance that never made it to market.

Latman, however, said that industry developments are already outpacing it. "I'm not sure there is a market for it [the iToaster plans]," he said.

Customers will be affected in various ways. Those that bought PCs from the short-lived company will likely have no avenue for repairs. Some customers have also complained of PCs and refunds that never materialized.

Although it is closing shop, the company's troubles may not be over. The attorney general of Washington state has filed an action on behalf of 95 consumers who claim that they never received computers or refunds. EarthLink, a former strategic partner, also has a lawsuit pending. The current lawsuits have been filed against the company but conceivably could be amended to bring in actions against executives at the company.

Microworkz burst onto the scene in April by promising a $299 PC with a year's worth of EarthLink Internet access, itself a $240 value. Customers swarmed the site but soon complained of orders that never materialized.

That first promotion turned out to be "a disaster," See special report: PC free-for-all Latman said earlier this month. The company adjusted its business model, and even tried to move into Internet appliances, but problems and customer complaints continued to mount. Paula Selis, the Washington state assistant attorney general handling the case, said complaints had reached a crescendo in June. The complaint was filed in October.

Ironically, Latman stated that one of the company's creditors will be attorneys that represented Microworkz--until recently--in the Washington state case.

Oddly, despite continual problems, Microworkz attracted notable backers. At one point, the company was in comarketing discussions with AOL. In August, the company landed an agreement with AT&T that let Microworkz bundle the telephone giant's ISP service on its PCs.