SUNNYVALE, Calif. (Reuters) - The once high-flying software company General Magic Inc. GMGC.O said on Wednesday it would cease operations effective at the close of business today because it could not get additional financing or complete a merger or acquisition.

General Magic said most of its employees will leave immediately, but a small group will stay for a few months to manage the sale of its assets and resolve its debt.

The proceeds from the sale of its assets will be used to pay its creditors. The company does not expect to have assets remaining for common and preferred stockholders.

Shares of General Magic fell 21 cents or 84 percent to 4 cents in early morning Nasdaq trading. Earlier it reached an all-time low of 3 cents. When the company went public in February 1995 at the beginning of the Internet boom, its shares more than doubled on the first day to $27.75.

The announcement comes on the heels of a warning in July in which the company said revenue would fall short of previous expectations. General Magic also cut jobs as it suffered from delayed corporate spending and implemented a 1-for-14 reverse stock split.

Founded in 1990, General Magic started out with a groundbreaking operating system for personal digital assistants that allowed the devices to send and receive electronic mail and faxes and to talk with corporate networks.

The company now makes software that allows users to access information via the Internet and telephone by hands-free voice command.

It counts OnStar Corp., General Motors Corp.'s GM.N in-vehicle safety, security and information services unit, as a customer.

It has also developed products with AT&T Corp. T.N , Motorola Inc. MOT.N and Sony Corp. 6758.T . These companies, along with Apple Computer Inc. AAPL.O , were core investors in General Magic.

Sunnyvale, California-based General Magic said 15 employees would be retained at OnStar's expense to facilitate a smooth transfer to another vendor of the operation and support of the voice application software it was maintaining for OnStar.