December 26, 2000, 9:55 AM

For CDnow, one is the loneliest number, spending for two in anticipation of its merger with Columbia House, must adjust to the single life again. With the merger called off, the online music retailer is looking for ways to cut its costs by one-third-even while scouting for new suitors.

CDnow says it’s hired Allen & Co., New York, to identify new partnerships. Meanwhile, the retailer stands to get a $21 million investment from Columbia House parents Sony Corp. and Time Warner Inc.. The two also agreed to convert an earlier $30 million short-term loan into long-term debt.

As for cost cutting, CDnow says it will start by lowering marketing costs but doesn’t expect layoffs. During the fourth quarter revenue rose 154% to a record $53.1 million, while traffic was up 181%. Revenue from on-site ads surged to $3.4 million.

Sean Badding, vice president of the Carmel Group, Carmel, Calif., attributes the merger’s demise to management differences. “I think it was some internal squabbling over management issues and business model,” Badding says. “They just realized it wasn`t a good fit.”

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