Amazon Faces Facts And Fires 150
Sydney Morning Herald
Monday January 31, 2000
Amazon.com will lay off 150 employees in its first retrenchment since the company was formed, just five days before it is expected to report further losses in its fourth quarter.
The Internet's largest retailer, which began selling online in 1995, would not give reasons for cutting 2 per cent of its staff.
However, it seems that Amazon is suffering from the broader difficulties faced by Internet retailers, as US online clothes retailer Boo.com has also admitted to cutting jobs and is understood to have dismissed 100 people.
According to industry analysts, the job cuts indicate that some online companies have not lived up to their promise since the Christmas period. Many have not sold as much stock as expected, which has raised the issue of restructuring, staff reductions and advertising cutbacks.
The e-commerce sector in Australia is not expected to experience job losses yet, according to the principle Internet analyst at www.consult, Mr Ramin Marzbani.
``It's early days in Australia and we haven't reached the kind of size and visibility of the big US companies," he said.
``We have to hire more people first before we can fire them."
The news of the Amazon job losses sent its shares down $US5.25, or 7.8 per cent, to $US61.69. The downturn is the latest in a seven-week slide that has deducted more than $15 billion from the company's market value. Amazon shares peaked on December 10 at $106.69.
The company has 7,500 employees, up from just over 2,000 a year ago.
Wall Street is expecting Amazon to report a loss of about $US163 million ($256.7 million), or US48c a share, according to a poll by First Call/Thomson Financial. A year ago, Amazon lost $US46.3 million, or US15c a share, on sales of $US253 million.
However, the lay-offs have been interpreted by some in the financial sector as a sign of growing fiscal responsibility on the part of the high-profile Internet company.
``Our view is that this is a very good sign that Amazon is being run by professionals who want to keep the best people," said Mr Tom Wyman, a financial analyst for JP Morgan.
Amazon spokesman Mr Bill Curry said the cutbacks represented an internal reorganisation and was not related to seasonal staffing adjustments. ``We do ongoing organisational reviews to just ensure that we always have the right skills and the right number of people in line with the mission of the company," Mr Curry said.
Mr Tony Lenk, chief executive of eToys, one of the largest Internet retailers, said last week that after the holiday season the industry faced challenges to become profitable.
There was a ``need for more efficient operating infrastructures to keep pace with customer demand," Mr Lenk said. Amazon has lost money since its launch, as it invests substantial sums into marketing, inventory and distribution, and new investments. The bookseller added auctions to its site last year and began selling software, tools, toys, electronics and other goods.
But some investors are getting impatient. Revenue from the holiday quarter was $US650 million, more than 2.5 times the year-earlier period but still lower than what some investors were expecting.
© 2000 Sydney Morning Herald