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Technology Stocks : Webvan Group (WBVN) -- Ignore unavailable to you. Want to Upgrade?

To: Bill Ulrich who wrote (306)	1/10/2001 2:43:26 AM
From: EL KABONG!!!	Read Replies (1) \| Respond to of 464

interactive.wsj.com January 10, 2001 Webvan Expects Narrower Loss Amid Weak 4th-Quarter Sales By NICK WINGFIELD Staff Reporter of THE WALL STREET JOURNAL Webvan Group Inc. said it expects to report that fourth-quarter revenue fell substantially below forecasts. The news comes at a particularly bad time for the Internet grocer: Webvan expects to receive a letter this week from the Nasdaq Stock Market warning that its flagging share price puts it in danger of losing its listing on the exchange. Webvan, of Foster City, Calif., said it expects to report revenue of about $84 million for the fourth quarter, about 16% less than forecasts but quadruple its $21 million in pro forma sales a year earlier. Both periods include sales of HomeGrocer, a company it acquired last year. While not releasing a net-loss figure ahead of its full financial report later this month, the company estimated it will post a pro forma loss per share of 23 cents, a number that excludes noncash compensation and other related charges. Nine analysts surveyed by First Call/Thomson Financial had called for a pro forma loss of 26 cents a share. Shares of Webvan remained unchanged Tuesday at 47 cents in 4 p.m. trading on the Nasdaq, nowhere near their 52-week high of $17.50. Like other Internet and technology companies that have made early disclosures of disappointing sales, Webvan pinned part of the blame for its woes on weak retail spending by customers during the holiday season. But company executives also said its shortfall came about as it shifted its strategy to get existing customers to buy more frequently on the site instead of acquiring new customers, part of an effort to conserve its precious reserves of capital. The change "created a falloff in first-time orders," George Shaheen, Webvan's chief executive and chairman, said in a conference call with analysts. "We feel this shift in marketing strategy is the right long-term solution for the business as we continue to improve our bottom line." Analysts were concerned that Webvan simply wasn't seeing enough customers signing up for home delivery of produce, diapers and other grocery goods. "To miss that much on revenue shows a clear problem with demand," said Mark Rowen, an analyst at Prudential Securities. Webvan's dwindling financial reserves also raised worries. Despite a 21% decrease in its marketing spending, which helped it trim losses in the quarter, Webvan consumed $167 million in cash in the fourth quarter. While about $65 million of that covered merger and restructuring charges and the completion of new warehouse facilities, more than $100 million was operational losses. At its current burn rate -- the pace at which it consumes cash -- Webvan will exhaust its approximately $210 million in cash within two quarters. Webvan executives said they would disclose plans to cut back spending when the company releases its complete financial results. Robert Swan, Webvan's chief operating officer, said the company had effectively halted its expansion into new markets. Some analysts believe that Webvan will have to raise money to keep itself afloat and that it will have a difficult time doing so until it proves it can turn a profit in its prime markets. The company has long targeted its San Francisco-area operations as a test case for its business model, and many analysts regard the Internet-savvy region as Webvan's most-promising market. Mr. Swan wouldn't say whether San Francisco had achieved profitability yet. "If you're not getting it there, what's a better region to be going after?" asked Tim Albright, an analyst at Salomon Smith Barney. Compounding Webvan's troubles is the threat of delisting. Tuesday marked the 30th consecutive trading day during which Webvan's stock closed beneath a dollar. According to Nasdaq listing requirements, companies whose stock trades under a dollar for that period of time automatically receive notice that they have 90 days to get the bid price on their shares above a dollar for 10 consecutive trading days. If the company fails to do that, it can request a hearing with Nasdaq officials to delay the delisting process. A Nasdaq spokesman said the market doesn't comment on communications with specific companies. A Webvan spokesman said the company expects to receive a notice from Nasdaq sometime this week. Webvan could attempt a reverse split of its shares to boost its stock price. However, some companies that attempt such a move see their shares fall back to their original price range. If its stock is delisted, Webvan would face another serious impediment to any effort to raise additional capital down the road. Mr. Swan said Webvan hopes its existing priorities, such as conserving cash and getting important operations to profitability, will help boost the company's share price. Write to Nick Wingfield at nick.wingfield@wsj.com KJC