The group, which controlled a majority of Netpliance's shares, sent the company a letter Monday announcing the withdrawal.
Francis Webster III, the company's chief financial officer, said in an interview that the investment group gave no reason for its withdrawal in the letter. Webster was not part of the buyout group.
In December, the group, led by CEO John McHale, announced a bid to buy the company's remaining shares at 65 cents a share. That represented a 91 percent premium to the prior day's closing price, but an offer that was dramatically below Netpliance's 52-week high of $26.12.
Investors responded angrily, flooding message boards and filing at least two lawsuits. Webster said the the company will, for now, continue life as a public company.
However, Netpliance announced last week that it faces a delisting from the Nasdaq.
The company had formed a special committee of its independent directors to consider the buyout offer, Webster said. He would not comment on the negotitations. Webster said he did not know what role, if any, the shareholder lawsuits played in the investor group's decision to end the bid.
McHale was not immediately available for comment.
Netpliance has been widely praised for pioneering the Internet appliance market with its I-opener Web-browsing appliance. However, the company has struggled to find a business model that works. The company had tried selling the unit for as low as $99 and recouping its losses by charging monthly Internet access fees.
In November, the company said it was getting out of the business of selling Internet appliances directly and would instead look to help larger companies manage their networks of Net appliances.