SAN FRANCISCO (08/28/2000) - Almost every day, Nicholas Butterworth wipes his brow in relief. In March, the CEO of MTVi, the Viacom -owned unit of MTV Networks, filed papers to hit the stock market in a public offering. But then came April's market turmoil, and the company put the IPO on hold indefinitely.

Now, that looks like a wise move. "Our goal is to maximize shareholder value," says Butterworth. "If an IPO helps us accomplish that, that's a strategy we will pursue. If not, then it's not the right strategy."

For others, the idea was too tempting to resist. Cobble together your Internet divisions and spin off a chunk to the public in a shiny display of dot-com acumen. An easy way to find hundreds of millions of dollars to fuel your Internet ambitions.

Oops. Now it's cleanup time. Companies from Barnes & Noble Inc. to General Electric Co. find themselves with huge stakes in poorly performing, out-of-favor spinoffs, with their own brand potentially sullied. Other firms - Dow Jones, the New York Times Co. and Viacom among them - shook up their corporate cultures in preparation to do the same. "Everyone wanted to have an Internet property," says Greg Kyle, president of Pegasus Research, an Internet research firm. "They wanted to spin off their Net divisions to unlock shareholder value." The problem, some observers say, is simple. Many of these companies went public long before they were ready.

NBC spinoff NBCi, for one, is ready with hindsight. Once trading at over US$100 a share, NBCi has lost 89 percent of its value this year, becoming an object lesson in Internet strategies gone wrong. "We could have better predicted what turned out to be the most unpredictable business in business history," says Marty Yudkovitz, NBC's president of digital media. "It has been a remarkably fast-paced and volatile segment."

Tracking stocks aren't immune, either. Case in point: the public spectacle of Go.com, the tracking stock issued by Disney in an effort to get on the Net.

Once hailed as an ambitious media and Internet convergence play, Go.com has lost more than 60 percent of its value since its offering last November. What's more, in what may be a sign of how far the mighty dot-coms have fallen, in early August Disney renamed Go.com the Walt Disney Internet Group, complete with a new ticker symbol: DIG. The move may be helping; since then the stock has been creeping steadily upward.

Unlike spinoffs, tracking stocks like DIG remain under the control of the parent company. They are typically easier to complete than a spinoff because a unit is not being formally separated from the parent company.

Spinoffs and tracking stocks aren't in and of themselves the problem. Indeed, there have been a handful of success stories in the past year. Hewlett-Packard Co. unloaded the robust performer Agilent in November, and 3Com Corp. spun off its popular Palm Inc. earlier this year. Both companies' stock remain strong.

In addition, spinoffs aren't completely passé. AT&T Corp. sent out its wireless group in a $10 billion tracking stock this spring, the biggest IPO in history.

While it hasn't performed brilliantly - it's off some 4 percent from its debut at $29.50 a share - that didn't stop competitor Verizon from filing for a $5 billion wireless IPO of its own last week.

As for Net spinoffs, they find themselves all dressed up with no place to go.

"There's been absolutely no demand," says Art Hogan, chief market strategist at investment bank Jefferies & Co. "No one wants to buy them."

To stay alive, these companies need to turn in a profitable performance. "We need a natural evolution to happen," says Marion Boucher Soper, director of research at Bear Stearns. "Before, there was a great deal of hype, but now we need tangible performance."

There's not always evidence that such performance will materialize, but efforts are under way. To remedy ailing spinoffs, at least one company has gone in reverse. Besieged teen catalog and store retailer Delia's spun off a network of sites, iTurf , in April 1999. Two weeks ago, iTurf turned around and bought Delia's.

Executives at the companies reasoned that the $86 million stock transaction would clear up the confusion investors seemed to have about the two entities.

More important, iTurf's red-ink-stained books would immediately be cash-flow positive when combined with the balance sheet of its parent. The acquisition is expected to be complete by the fall.

"We still have a powerful Internet-based business, but it actually makes money," says Stephen Kahn, chairman and CEO of Delia's and iTurf.

"There's an increasing interest in the marriage of land-based businesses and Internet businesses."

Delia's move is drastic; most new companies don't have the wherewithal to buy their parents. But those parent companies may simply buy back their spinoffs if only in an effort to stop the bleeding.

For its part, NBC has no concrete plans to lay claim to the 59.7 percent of NBCi it does not currently own, Yudkovitz says, adding the company is already on the mend. Barnes & Noble, which owns 40 percent of Barnesandnoble.com ( Bertelsmann owns another 40 percent) has focused its attention on finding new revenue streams in electronic books and custom publishing. Observers say the company has been reluctant to cross-promote the Web business for fear of cannibalizing business at its retail locations.

And then there are almosts, like MTVi. The list of companies that have postponed IPOs reads like a who's who of business titans; the New York Times Co., Viacom and CBS , among others. Their companies-in-waiting may someday get their chance - but only if they can demonstrate that profits are on the way.

"The market will no longer tolerate an e-commerce company with $6 million to $15 million in revenues and $100 million to $150 million in losses," says Kyle.

But he remains hopeful. "Traditional companies are sleeping giants, and sleeping giants have been known to awaken."

At least one giant has realized its most valuable asset was itself. "We knew the power of the peacock was tremendous," says NBC's Yudkovitz, "but we underestimated what the television connection should and would be."