Liquid Audio to evaporate

Liquid Audio's board of directors has voted unanimously to dissolve the company and distribute its cash reserves to shareholders.

Under the decision announced Friday, shareholders will receive $2.50 per share on Dec. 20. Payments will only be made to shareholders of record as of Dec. 10.

The Redwood City, Calif.-based company will continue operations until the board considers all options for its assets.

The distribution of assets ends a protracted battle over the future of the online music technology company. It now appears that dissident shareholders have succeeded in their push to liquidate the company, as opposed to selling it to Alliance Entertainment.

Signs of the Liquid's demise became apparent last month when CEO Gerald Kearby resigned shortly after the company pulled out of its proposed merger with Alliance.

Liquid produces software that prevents digital song files from being distributed illegally. Although the company was lauded by the recording industry for its copy protection technology, it could not compete with free file-swapping software such as Kazaa, Morpheus and the now-defunct Napster. Liquid also was unable to offer enough songs for people to purchase due to the recording industry's slower pace of releasing digitally encoded versions of their copyrighted songs.

In September, Liquid sold its digital encoding patents to Microsoft for $7 million.