After trying for three months to convince investors that it could integrate the news-wire supplier



into an aggressive online business-to-business endeavor,



backed off Tuesday.

Westwood, Mass.-based Rowecom, which helps businesses create online stores from which their employees can order magazines and journals, said it would drop its agreement to buy NewsEdge, of Burlington, Mass. According to a joint statement, the decision was mutual and the companies will instead form a partnership.

"We were spending a lot of time on organizational issues," said Richard Rowe, chairman of Rowecom. "We should have been spending our time building the service. Obviously there were some stockholders out there who were unhappy with the stock price. I wouldn't say that had no effect."

Rowecom's market value has fallen 50% since Dec.7, when the companies announced their merger intentions. Shares of Rowecom fell 5/8, or 2.6%, to close at 23 3/4 Tuesday, while NewsEdge shares lost 1/4, or 3.8%, to close at 6 1/4.

Three months ago, when Rowecom offered 0.26 of its shares for each NewsEdge share, Rowecom shares were trading at 50 7/8 while NewsEdge shares were at 12.

During that time, investors went for a wild ride as Rowe tried to explain his plans.

Peter Woodward, an analyst at

Regan Fund Management

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, a New York hedge fund that owns more than 25% of NewsEdge, said the firm had agreed to the transaction based on the initial valuation of NewsEdge and later came to understand Rowe's ideas for delivering information to businesses. On Tuesday, Woodward attributed the deal's breakup to price.

The deal first came into jeopardy on

Jan. 5, when an analyst from

J.C. Bradford

called into question the company's accounting. Other analysts, including those from Rowecom underwriter

J.P. Morgan

, said they had already included the extra taxes in their earnings estimates and called the resulting stock drop a buying opportunity.

The dispute centered around whether the company had fully accounted for European taxes it would owe following a previous acquisition.

Rowecom hired

Paul Burmeister, formerly chief financial officer for Fidelity, to get its books in order. It also hired


to set up offshore tax shelters, Rowe said in an interview Tuesday.

When it reported earnings on Feb. 10, the company came in far below the tax estimates of the analysts who had contradicted J.C Bradford, but still missed the consensus earnings estimates monitored by

First Call/Thomson Financial


Rowe said his plan met with resistance on Wall Street when he discussed integration of the two companies, but said investors seemed to like the concept of a NewsEdge partnership. Under the new deal, the companies will share revenue for sending customers to one another, he said. But he declined to specify the terms of the deal.