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2HRS2GO: When things go bad ...

Investors sweating out the futures of shaky, cash-poor Internet stocks such as and CDNow might want to call up the folks who rode the System Software Associates roller coaster for the past few years.

Once a high-flyer trading above $115 a share, it has gone Chapter 11 and the stock now trades at 9 cents a share.

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Piecing together what went wrong with System Software Associates (OTC BB: SSAX.OB) is somewhat easier than chronicling the ups and downs of second- and third-tier dot-com companies falling flat on their faces these days.

In a nutshell, System Software Associates developed enterprise resource planning software and was making a go of it through the early- and mid-90s. When competition from the big boys conspired with softening international demand, the company and the stock started to falter.

Unlike its Internet brethren, this company made money at one point and had annual sales in the high nine digits. At one time, it was quite popular in the analyst community and found itself trading around $120 a share in early 1996.

Company officials tried to recast the company as an information technology applications and services provider in recent years but the makeover was simply too little, too late.

I won't pretend to know every nuance and detail of SSA's unraveling. There were management issues and problems with its sales force. Bottom line: things fell apart in a hurry.

In fiscal 1999, it lost $89.5 million on sales of $316 million. Analysts dropped coverage of the stock and shareholders bailed out.

The stock fell from $40 in January 1998 to around $3 a share for most of this year.

On Wednesday, investors got the news they expected but never really wanted to hear: SSA filed for bankruptcy protection while securing $5 million in financing to facilitate the sale (read liquidation) of its assets to Gores Technology Group.

System Software said it agreed to sell all of its assets to Gores, an international technology and management company, for about $52 million in cash and 25 percent of the common stock of the newly formed subsidiary.

It also reached an agreement with its senior secured lenders on terms of a debtor-in-possession loan facility.

The proposed debtor-in-possession facility, which has been submitted for bankruptcy court approval, provides System Software with up to $5 million of new funding for operations through the end of the month. Extension of the DIP facility beyond May 26 requires approval by the company's senior secured lenders.

But here's where it gets interesting.

If the Gores transaction is completed, System Software said it expects that all of the cash received upon closing of the sale will be used to pay its senior secured lenders and administrative claims in bankruptcy, leaving 25 percent of the common stock of the newly-formed subsidiary available for claims of unsecured creditors of the bankruptcy.

These creditors include holders of System Software's 7 percent convertible subordinated notes due 2002.

And what about the shareholders, the poor lemmings who held on to the stock in the hopes of finding a white knight, who own a stock worth as much as a breath mint?

They get nada.

"As previously disclosed, System Software does not expect any distribution to be made to holders of its equity securities," the company said in a release.

So, yes, it's true that even high technology companies go belly up once in awhile. And, yes, shareholders get screwed every so often.

That's what makes the recent posturing by the likes of (Nasdaq: KOOP) and CDNow (Nasdaq: CDNW) so entertaining.

Both companies are on the endangered 'Net species list. simply forestalled the inevitable by selling off stakes of its business to and AOL, two companies that decided it was better to take an ownership position in the company rather than getting nothing at all.

CDNow, which missed analysts' estimates in its first quarter Tuesday, continues to lose money at an appalling pace and expects its sales to regress in the next couple of quarters.

Both of these companies have been about as subtle as a street prostitute in seeking out a potential sugar daddy. And despite all these obvious signs of trouble, these companies look investors straight in the eye and tell them their business model is and will be successful. And CDNow and are just two of many.

Take it from the poor chumps who rode SSA all the way to the bottom. Even at an enormous discount, some stocks just aren't worth the risk.