Amazon cuts 1,300 jobs on Q4 losses
Published: 31 Jan 2001 08:55 GMT
Amazon.com posted fourth-quarter results Tuesday that slightly exceeded expectations and said it will lay off 15 percent of its staff, or 1,300 employees, as it strives to become profitable by the end of the year.
The Seattle-based company posted a pro forma net loss of $90.4m (£61.8m), or 25 cents per share, excluding investment and other non-operating losses. A year ago, Amazon posted a pro forma loss of $184.9m, or 55 cents per share.
Analysts expected Amazon to lose 26 cents per share, according to a survey by First Call.
Amazon stock closed the regular trading session on the Nasdaq down $1.19, or nearly 6 percent, to $18.94. In after-hours trading on the Island ECN electronic communications network, Amazon's stock was down another 57 cents to $18.37.
Net loss for the period was $545m, or $1.53 per share, on revenue of $972 million. That compares with a loss $323m, or 96 cents per share, on revenue of $676m in the same period in 1999.
In addition, the company said it expects to be profitable on a pro forma basis by the fourth quarter of 2001. "While the strength of consumer spending remains uncertain, and there are no guarantees, we expect Amazon.com as a whole to reach operating profitability in the fourth quarter of this year," Amazon chief financial officer Warren Jenson said in a statement.
The announcement marked the first time the company had put a target date on reaching profitability. The job cuts and consolidation of the distribution and customer services centres were part of a drive to reach that target date for profitability, Jenson said.
"We've been asked thousands of times in the last five years when Amazon.com will be profitable," Amazon chief executive Jeff Bezos said in a conference call with investors. "We resisted the temptation to answer that question because we thought it would be irresponsible.
"We know these types of goals are never guaranteed, but the progress we've seen in the last year gives us the confidence to share them today."
The company is laying off staff from its approximately 8,500-person work force. The cuts are primarily coming from Amazon's McDonough distribution centre and Seattle customer service centre, both of which the company will close. Workers in the Seattle service centre had been attempting to organise a labour union, but Jenson said the closure of the centre was unrelated to the union activity.
"We totally respect the rights of every employee in this company," Jenson said in a conference call with reporters, adding that the Seattle customer service centre was the company's "highest cost" centre.
Alan Barclay, an Amazon customer service representative and a leader in the movement to unionise the Seattle service centre, questioned the closure of the centre. He called the closure one in a string of shortsighted moves by the company in recent years.
"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," Barclay said in an email to ZDNet's sister site, CNET News.com. "I now fear that Amazon is in for rocky times ahead, as customers feel the impact of lost service expertise."
Amazon said it will also begin to operate its Seattle distribution centre on a seasonal, rather than year-round, basis. The company said it will take a $150m charge in the first half of 2001 related to the layoffs and closures. As expected, Amazon lowered analysts' expectations of its revenue for the coming year. The company projected that its revenue will grow 20 percent to 30 percent year over year in 2001, from $2.76bn in 2000 to $3.3bn to $3.6bn.
That marks a significant change from the company's expectations at the end of the previous quarter. In a conference call last year announcing the company's third-quarter results, Jenson had projected that Amazon would pull in $4bn in revenue in 2001.
Jenson said the company revised expectations after seeing its fourth-quarter results and its early sales from the first quarter. "There's been quite a dramatic shift in the overall economic environment," Jenson said.
Guy Kewney reckons on two things about Amazon that are worth remembering as it lays off 1,300 staff, and makes its first "irresponsible" predictions about future business. One, everybody knew it had to happen and two, everyone thinks it's a shame. Go to AnchorDesk UK for the news comment.
See techTrader for technology investment news, plus quotes and research.
Have your say instantly, and see what others have said. Click on the TalkBack button and go to the ZDNet News forum.
Let the editors know what you think in the Mailroom. And read what others have said.
Did you find this article useful?
20 out of 65 people found this useful
- Share this article:
