Amazon.com Inc. said yesterday that it will lay off 150 employees as part of a company-wide reorganization, just five days before it is expected to report further losses in its fourth quarter.
The Internet's largest retailer wouldn't say why it's cutting staff. But a spokesman said the firings are not related to the losses. The layoffs will be spread across its divisions and hit mostly at its Seattle headquarters. The company has 7,500 employees, up from just over 2,000 a year ago.
"This is only 2 percent of our work force," spokesman Bill Curry said of the layoffs. "As part of a regular, ongoing review of our organization, we decided to make sure we have the right skills and the right people with those skills."
Those laid off will receive severance packages and help in finding new jobs, Curry said.
Amazon stock fell $5.25 yesterday to close at $61.68 3/4. The shares have fallen by almost half from a high of $113 in December--largely because the company has warned of higher-than-expected losses.
Some analysts called the declines of the shares of Amazon and eToys Inc.--which fell about 25 percent in the past two sessions--the end of investors' love affair with business-to-consumer companies. Although consumer e-commerce spending hit a record high of $7 billion over the holiday season, some companies had problems filling orders due to insufficient stock and manpower. And the companies still aren't making money.
Tony Lenk, chief executive of eToys, one of the largest Internet retailers, said this week that in the wake of the holiday season, the industry faces challenges to become profitable.
There is a "need for more efficient operating infrastructures to keep pace with customer demand," Lenk said. "Scaling back-end operations is a science the industry will master, but the art of acquiring and retaining customers is far more complex and potentially far more costly."
Amazon has enjoyed rapid growth in its customer base and sales, but it has recently been losing about $1 million a day. The company, which will release its latest quarterly results next week, has already said fourth-quarter sales rocketed to $650 million, 2 1/2 times the level of the last quarter of 1998. But analysts forecast a record loss of 48 cents a share, before acquisition-related costs such as goodwill, according to a poll by First Call/Thomson Financial.
Ken Cassar, an e-commerce analyst with Jupiter Communications, said the layoffs may be Amazon's way of reassuring investors who are nervous about how much money dot-coms have lost.
"Amazon may be making the case to Wall Street that they are indeed concerned about cost control. This is perhaps not just coincidentally a few days before they announce earnings," Cassar said.
"This points to their need to be frugal," said David Cooperstein of Forrester Research Inc. in Cambridge, Mass. "The holidays are over. They've acquired toy and tools companies, so I'm sure there's a redundancy in their overhead staff."
"These layoffs tell you they are trying to drive the company toward profitability," said Tom Wyman, an e-tailing analyst at J.P. Morgan & Co. "They're pruning the labor force, and that's what you have to do to run a profitable business."
Wyman said Amazon's fourth-quarter cash balance is expected to dip to $750 million, from $905 million in the third quarter. That will prompt Amazon to do some sort of major refinancing next year, Wyman said, but added, "they're not out of cash right now."
Staff writer Leslie Walker contributed to this report.