PhotoPoint parent shutters operations

"While Pantellic has ceased operations, we are actively working on a solution for people to get copies of their photos," Pantellic President Dale Gass wrote in an e-mail. "There will be an announcement at www.photopoint.com, and members will be notified via e-mail when this is available."

Gass' statement is a rare public communication from privately held Pantellic since the PhotoPoint site was pulled down without notice in mid-December. The shutdown left some 1.25 million PhotoPoint members in the dark about the status of their accounts and personal files, offering a cautionary tale of the evanescent nature of business in cyberspace.

For the past several weeks, numerous PhotoPoint customers have complained of the outage in e-mails to CNET News.com, including some who said they had not made backups of their photo files.

"I was one of their paying customers and have now lost about two years worth of pictures that I had on their albums for storage," one reader wrote to CNET News.com. "I did not have any backup copies because I thought that was what I was paying for...These are pictures that cannot be replaced. They are that of my grandchildren, kids, parties, vacations, and the construction of our house. I am heartsick about it."

According to Gass, Pantellic has been unable to communicate with its customers since a "substantial amount" of its networking equipment was seized on the day the Halifax, Nova Scotia-based company ceased operations.

In a letter to Pantellic creditors, the company said it closed Dec. 14 and had asked creditors to make arrangements to retrieve its equipment. It was unclear how much equipment had been claimed or how the liquidation would affect the company's ability to preserve data formerly in its possession.

The letter, dated Dec. 31, warned creditors that equipment they take possession of "may contain data or intellectual property secured by another creditor."

The company said it expects to have outstanding debts between $4.7 million and $5.5 million and no assets of any substantial value after secured creditors reclaim its property. As a result, the company does not "anticipate that there will be any return to unsecured creditors," the letter said.

Asked in an e-mail about the physical whereabouts of its equipment, Gass replied that he was "not really at liberty" to answer.

The demise of PhotoPoint comes as the online photo market is shrinking, leaving only the strongest players on the field. In June, Kleiner Perkins Caufield & Byers-backed Zing.com closed its consumer operations. That same month, Ofoto was swept up by Eastman Kodak. And in October, mail-order processor District Photo bought online photo company Snapfish.

For its part, PhotoPoint has been passed around like a hot potato. Pantellic spun the company off about two years ago and scored around $11 million in venture capital financing for the start-up. But venture capital firm Sherwood Partners shut it down and sold some of the assets back to Pantellic in July. After a five-day outage, the site returned but began charging for its services.

Gass said Pantellic took all good faith measures possible to try and keep the PhotoPoint site alive, but in the end, he blamed bandwidth costs and the effects of the Sept. 11 terrorist attacks in driving the service out of business. He said the company stopped charging credit cards, cashing checks, and taking print orders from "the instant we knew our viability was threatened."

He added that the company only belatedly realized that some of its customers were relying on it as the sole keeper of treasured photos.

"While we always intended PhotoPoint to be a means for people to share their photos, and not a photo archival service, we now realize that some people kept their only copies of their photos on the site," he said.