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>Seattle Times technology reporter
Online retail giant Amazon.com prepares to report its fourth-quarter financial results today amid speculation it may downgrade sales forecasts for the coming year and have substantial layoffs.
The Seattle company would neither confirm nor deny a layoff. But reports persisted on Web sites and TV news programs, and among employees, that Amazon.com would cut up to 20 percent of its staff to reach profitability sooner - a move analysts say Wall Street would welcome, if not expect.
With 8,500 Amazon.com employees, such a layoff would involve 1,700 workers.Amazon.com laid off 150 employees last January.
"I wouldn't be surprised if their stock went up" in response to layoffs, said Adam Hamilton, a research analyst with McAdams Wright Ragen in Seattle. "Just the way Wall Street's behaved - announcements of layoffs have been treated as a neutral, if not a positive (development), for most companies."
Amazon.com, whose shares have lost 77 percent of value since February, said this month that fourth-quarter sales would come in at the low end of previous forecasts, prompting some analysts to cut its stock rating.
Its sales forecast for the quarter - $960 million - would fall short of analysts' estimate of $1.01 billion, according to First Call/Thompson Financial. Customer growth also has cooled, with 4 million new customers for the quarter, just a 4 percent improvement over the 3.8 million customers added a year ago.
Amazon.com's numbers have prompted some analysts to take a dimmer view of prospects for 2001, with an eye on how the company manages expenses. Robertson Stephens analyst Lauren Levitan cut her sales estimate from $4 billion to $3.75 billion, and told investors to beware of Amazon.com's "spin effect" in explaining its performance.
Levitan wrote yesterday in a research report that Amazon.com may blame its numbers on lower consumer spending during the holiday season. But, she said, the company "should have cleaned up this year given the diminishing competitive landscape and overall health in online retail sales, which we estimate were up roughly 100 percent vs. last year."
Analyst Kevin Silverman of ABN Amro earlier forecast the company would need $5 billion in annual sales to break even. With slowing sales and customer growth rates, the company should lower that break-even figure, which is why a cost-cutting layoff would make sense. "When you approach $3 billion or $4 billion in sales, that's a level where it's expected that someone could make money," he said.
Business news and rumor-tracking Web sites used the numbers as a reason some Amazon.com employees would receive pink slips as early as today. Speculation centered on cuts in customer service and distribution.
Gretchen Wilson, an organizer with the Washington Alliance of Technology Workers, said the layoff threat was partly why Day 2 - a union-organizing movement at Amazon.com - was formed.
"These employees feel like there's an increasing volatility; they see layoffs happening," she said. "It is really reflective of this growing economic insecurity in the dot-com industry and e-commerce in particular."
Alan Barclay, an Amazon.com customer-service employee for almost three years, said morale is low with talk of impending layoffs. "People are afraid," he said. "It's a feeling between afraid and not caring anymore." |
