Amazon.com Tumbles After Layoffs Are
Discovered
By MICHAEL BRICK
NYTimes.com/TheStreet.com, 4:10 p.m.
ll news is local, as the old city editor's mantra goes. But that rule
does not always apply when a locally headquartered company's
stock is among the hottest issues on the national markets, Amazon.com
proved Friday.
The company, which confirmed that is had laid
off 150 of its 7,500 workers, never publicly
announced the move. It was first reported in the
Seattle Post-Intelligencer on Friday.
"I think an employee must have called the
paper," said Bill Curry, spokesman for Amazon.
"Or an ex-employee."
Amazon shares have been falling all week, and
both the Nasdaq and TheStreet.com Internet index were suffering
Friday. But at 10:40 a.m. EST, they began their most precipitous slide of
the week, last down 5 3/16, or 8 percent, to 61 13/16 after reaching a
session low of 60 around 12:20 p.m. EST.
The report appeared on the paper's Web site, which was updated with
the current day's paper at 1:47 a.m. PST, or 4:47 a.m. EST, according
to Gina Hills, online producer for the paper.
But by 11 a.m. EST in New York, with the stock price on the move,
several Wall Street analysts had not seen the report and were unsure
what to make of the layoffs, if anything.
By early afternoon, the company began portraying the cuts to analysts as
a reaction to a hiring boom last year. Tom Wyman, who covers
electronic commerce for J.P. Morgan, said the company told him it hired
5,500 people during 1999, after starting that year with 2,000 employees.
"This is what you call housekeeping," said Wyman, who rates the stock a
buy. He said the newspaper's article hurt the stock price and created a
buying opportunity. "The Seattle story made it seem like this was Value
America or beyond.com all over again." Wyman's firm did not perform
underwriting for Amazon.
Most analysts agreed that the news was unsurprising. Across the
industry, online business to consumer sales companies have rapidly
expanded, especially in the months leading up to the busy holiday retail
season, which many analysts saw as a sort of virtual test of fire for the
cyber-sales set.
Last week, online software company beyond.com cut 20 percent of its
workforce, or 75 employees. Boo.com, the British Web site that initially
aimed to be all things -- magazine, shopping mall, etc. -- online said it
would scale back its operations after making job cuts, the Daily
Telegraph of London reported Thursday. And Value America said Dec.
29 that it planned to cut its workforce by half.
"Clearly Amazon was never a tightly run ship," said Dan Ries, an analyst
for C.E. Unterberg Towbin, who rates the company's stock a buy.
"They've always erred on the side of too much."
Whether Amazon's job cuts are meaningful will depend on what kind of
jobs have been slashed, analysts said.
The company has hired a new chief financial officer and a new chief
operating officer in recent months, and staff changes are almost a
foregone conclusion, Ries noted. His company has not done any
underwriting for Amazon.com.
Dean Ramos, an analyst for George
K. Baum & Co., said the move
reflects a trend that has swept online
retailing at Internet speed, building to
a frenzy of both substantive
restructurings and promises of them.
"The build-out they've tried to do is
so fast," said Ramos, who rates the
stock a hold. "That in itself is going to
create challenges."
Amazon in particular, wary of Media Metrix numbers and under Wall
Street's scrutiny during the holidays, has attempted to build its fulfillment
division large enough that no customer would ever be disappointed, he
said.
"That kind of attitude can only be done temporarily because that kind of
overhead will bury you," Ramos said. Ramos' firm has done no
underwriting for Amazon.com.
Still, the analysis amounts to speculation unless the company discloses
which jobs it has cut, analysts agreed. Wyman, the J.P. Morgan analyst
who spoke to company officials on Friday afternoon, said he was told
the employees who were dismissed were performing below the
company's standards.
"If it's a research company and you start to cut scientists, that kind of
worries you because you're cutting your future," Ramos said.
Earlier Friday, several analysts said they were unable to obtain any
information from the company.
Curry, the Amazon spokesman, said the job cuts were the result of
reviews that will be conducted regularly but will not necessarily lead to
regular job cuts.
"The job eliminations were spread throughout the company," he said.
"There's no single area that represents all or most of them."
The company expects to hire across the board in the near future, and its
strategy has not changed at all, he said.
"That's the level of detail I can give you, or the level of non-detail," he
said. |
