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Funding shortfall forces Web company to sell

Back-end Web products and services provider Cat Technology is selling part of its business after it failed to secure a second round of funding.

Back-end Web products and services provider Cat Technology will sell part of its business to survive after failing to secure a second round of funding, sources close to the acquisition told CNET on Friday.

Privately held Cat Technology saw its second round of funding fall through in April. Since then, the Los Gatos, Calif.-based company has been seeking a buyer for part or all of its business. Cat Technology, which provides hardware, software and services to Web companies including eBay and Critical Path, plans to announce the sale of its managed services division Monday, sources said.

The company declined to comment on the specifics of the sale but acknowledged that its funding woes had led it to seek and find a potential buyer.

"We have a letter of intent, but we do not have a finalized merger document," Chief Executive Larry Lenhart said in an interview. "The deal is still subject to due diligence. We have been evaluating strategic alternatives for the past 10 days and are looking to do what's best for our employees, customers and shareholders."

Sources said the company plans to maintain its business focus and customer management practices despite the sale.

Founded in 1993, Cat Technology last year completed its first Internet operations center, which analyzes Web site performance, in Los Gatos. The company plans to build more centers in the United States and abroad.

In addition to the Los Gatos headquarters, Cat Technology has offices in San Francisco, Los Angeles and Reston, Va. First-round investors included Sutter Hill Ventures, Trident Capital, AVI Management Partners and Beneventure Capital.