The upshot is that investors are "shooting the wounded," dumping their holdings in former high fliers, including eToys and CDnow, and turning them into "single-digit midgets," Silicon Valley parlance for companies with droopy share prices.

In turn, falling stock prices make it far harder for a company to operate, sharply limiting its ability to keep valued employees and to attract more capital to keep growing. Once the stock price drops too low and a company becomes what Wall Street calls a "single-digit midget," it often languishes there.

Montgomery Securities analyst Alice Ruth says the company could post one or two more quarters in the red. As for the stock, Feshbach says: ''It looks like a single digit midget to me.''