Glenn, Wall Street might like the Amzn cuts, but not the poor 1300 who are losing their jobs...and I guess that's only the beginning.:-(
>Seattle Times technology reporter
Alan Berner / The Seattle Times
Amazon.com workers mill about outside the Westin Hotel after learning they will lose their jobs.
After years of cajoling by Wall Street and the media, Amazon.com yesterday disclosed when it planned to turn a profit - by year's end -- but said it is laying off 1,300 workers and scaling back get there.
The company, which reported fourth-quarter financial results yesterday, said it would jettison 15 percent of its staff, 850 of whom work in Seattle.
Among the changes, the company will close its Seattle customer-service center and a year-old distribution center in McDonough, Ga. It also plans to trim its corporate staff and operate its Seattle distribution center only during the busy holiday season. The layoffs will result in a $150 million charge for the first half of 2001.
The reaction from Wall Street and workers was strikingly different. While the company attributed the cuts to a slowing economy, the extent shocked many workers despite weeks of persistent rumors.
"I was surprised that the cuts went so deep," said Chris Chase, a customer-service employee who is being laid off.
On Wall Street, analysts said the move was a positive development, one they had been eager to see.
"The silver lining is they focused on profitability at all costs, at all means," said Jeetil Patel, a senior analyst with investment bank Deutsche Banc Alex Brown. "That is one of the most important goals. It should be milestone No. 1 for the company."
Wall Street wants results
Wall Street has grown increasingly impatient with Amazon.com, which has accumulated $2.29 billion in losses while building an online retail powerhouse. It has yet to turn a profit.
The company yesterday reported a widened fourth-quarter loss of $545.1 million, or $1.53 a share, compared with $323.2 million, or 96 cents a share, a year ago.
Excluding costs associated with mergers and stock-based compensation, the company lost $90.4 million, or 25 cents a share, beating analysts' estimates by a penny.
Sales for the quarter were $972.4 million - a 44 percent improvement over the $676 million a year ago. Still, the numbers were lower than analysts' estimates of $1.01 billion. For the year, the company lost $1.4 billion on sales of $2.76 billion.
Chief Executive Jeff Bezos asserted the company has improved operations enough to project an operating profit in the fourth quarter of 2001.
He pointed to the company's operating loss, which slimmed down to 6 percent of sales, compared with 26 percent a year ago.
"If you look at the financial performance, it's definitely been an unbroken stream of four quarters of significant improvements," Bezos said. "Those kind of improvements gave us the confidence to project operating profitability."
Still, the company had to lower its overall projections for the year, saying sales would increase between 20 percent and 30 percent over 2000.
Downgraded forecast
Before the company released its numbers, several analysts reduced their projections for sales in 2001 from $4 billion to between $3.7 billion and $3.9 billion. The company's downgraded forecasts fell even further, to between $3.35 billion and $3.55 billion.
"We're 180 degrees opposite of where things were a year ago," said Chief Financial Officer Warren Jenson, pointing to a strong economy and Internet commerce environment last year. "That has to be a very significant factor."
Slower growth ahead
Analyst Kevin Silverman of ABN Amro said the company has simply stopped growing at warp speed. "The good news is the trajectory of growth is slower, and they're reacting to it," he said. "The bad news is the company's (outlook) in the near-term. The company is not going to grow as fast."
Questions remain about how Amazon.com, a company with a reputation for obsessing over customer service, can survive without its most experienced staff.
Customer-service representatives here said they were paid almost double what their counterparts made in other states, such as North Dakota. They also questioned the company's timing - Seattle customer-service representatives had just started Day2, a movement to unionize local employees.
Amazon.com gave employees offers to relocate to customer-service centers in Grand Forks, N.D., or Huntington, W.Va.
Others were given severance packages.
"As a stockholder, I question the wisdom of this move," said Alan Barclay, a customer-service representative of almost three years who is being laid off. "Seattle customer service has been the backbone of company performance for its whole existence, and other customer-service sites have yet to meet the quality and capacity of this office."
Bezos said the layoffs were not a result of organizing attempts. Rather, the company chose to close the Seattle customer service center and the Georgia distribution center because the divisions were too costly to run.
Promise to maintain service
He said that the customer-service department has become increasingly efficient and that the layoffs should not affect service. "We are going to maintain our customer-service levels," he said.
Bezos called the layoffs "distressing for everybody." The company, he said, established a trust fund of Amazon.com stock that would be distributed to those employees in two years.
"Hopefully, as we do well over the next couple of years, we want them to share alongside us," he said.
Amazon.com's shares dipped as low as $18.63 in after-hours trading after closing $18.94, down $1.19. |
