Funny how rumors travel. I was in a gun shop sometime in 2001 a bit before the trade center attacks and heard the owner telling a customer that Colt had closed it's doors. He said it was true, some employees showed up for work there and the doors were locked up and the company closed down. He even went so far as to say that his supplier hadn't had any offerings from Colt in a while. The distributor he buys from told him that they can't get in touch with Colt and believe then to be out of business.
In 2003 I purchased a brand new factory Colt 1911, an 80 Series. In contrast to what Colt was offering from the late 1970's until the mid 1990's, my 1911 is excellent quality in fit, finish, workmanship, and reliability. It has had a bit over 7000 round fired through it so far with only a couple hang ups that I attributed to a cheap aftermarket magazine I have. No problems with the factory mags or the wilson mags I have.
Fast forward to this past Sunday at my local shooting range. I uncased three of my handguns, one of them the Colt 80 series. One of the range officers asked if my 1911 was a Springflield or a Kimber? To which I replied "it's a Colt". He went on to repeat a rumor he had heard from a customer at the range regarding Colt. It was almost word for word the exact same rumor I heard at that small gunshop (now out of business) back in the summer of 2001.
Colt is very much alive, a quick search on the internet takes you to their website. Though they seem to have almost abandoned the commercial handgun market to focus mostly on LE and Defense Dept contracts. Right now thier bread and butter is the M-4 and M-16 rifles. What limited number of handguns they are putting on the commercial market are of much better quality that anything seen from Colt in the previous 30 years.