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Jeff on Jobs
FOX News talks to Amazon.com CEO Jeff Bezos about layoffs
 
Analysts Praise Amazon.com Decision
To Cut 1,300 Jobs

By Allison Linn   Associated Press
SEATTLE — Amazon.com Inc. said it will lay off 1,300 employees, or 15 percent of its work force, in an effort to steer itself toward profitability despite lowered expectations for revenue growth in the year ahead.

Amazon also announced Tuesday a narrower-than-expected $545 million net loss for the fourth-quarter.

Analysts who cover Seattle-based Amazon said the cost-cutting measure was a step in the right direction, though they were concerned that the lowered sales forecasts could drag down earnings at the world's largest Internet retailer.

"I think the layoffs are just symptomatic of the fact that they are not growing as fast as they thought they would," said Allyson Rodgers, an analyst with Ragen MacKenzie Inc. in Seattle. Rodgers said the company has now realized that it will grow like a "traditional retail company," rather than a high-flying dot-com.

Analysts who cover Amazon were expecting revenue growth of 35 percent to 40 percent for 2001, but Amazon said growth would likely be more in the range of 20 percent to 30 percent.

Amazon Chairman and CEO Jeff Bezos told analysts during a conference call that the decision to cut workers was painful but "clearly the right business decision for us."

"We've been asked thousands of times in the last five years when Amazon.com would become profitable, (and) we've resisted the temptation to answer that question," Bezos told analysts. "Today, we're comfortable answering that question."

Amazon's chief financial officer, Warren Jenson, said the company will reach operating profitability — essentially profits from selling its goods online and excluding any one-time charges or writedowns in the value of its assets, including investments — by the fourth quarter of this year.

"My perspective is, this leader was able to weather the storm," said Jeetil Patel, a senior analyst with Deutsche Banc Alex. Brown in San Francisco.

Amazon will close a distribution center in McDonough, Ga., affecting 450 employees, and a customer service center in Seattle, affecting 400 more. The moves are expected within 60 to 90 days. It also said the company's distribution center in Seattle would be operated seasonally.

Amazon joins other companies that are laying off employees amid signs of a sluggish U.S. economy. Earlier this week, DaimlerChrysler announced plans for 26,000 layoffs and The Walt Disney Co. said it was folding its money-losing Internet business back into the parent company, a move that will result in 400 layoffs.

Amazon.com became one of the first — and biggest — ventures in online retailing in 1995, dominating Internet bookselling and soon branching out into music and video. It now sells everything from software and electronics to toys and home improvement items.

But it has plowed money into expansion and has never turned a profit. A year ago, the company announced its first layoffs — about 150 people. It now employs about 8,500 people worldwide.

Analysts who follow the company agreed the job cuts announced Tuesday were a good step but said the company's road to profitability could be bumpy as its revenue growth projections were reduced.

But Patel remained concerned with Amazon's revenue growth projections for the upcoming year.

Even so, Patel said, "the type of growth prospects we were expecting to see in one year, will now take a year and a half," Patel said.

For the three months ended Dec. 31, Amazon lost $545 million, or $1.53 per share, compared with $323.3 million, or 96 cents per share, a year earlier.

Excluding one-time items and goodwill, Amazon lost $90.4 million, or 25 cents per share for the quarter, compared with $184.9 million, or 55 cents per share, last year. Analysts surveyed by First Call/Thomson Financial were expecting a loss of 26 cents per share.

Fourth-quarter sales were $972 million, up 44 percent from $676 million a year earlier.

After finishing the regular trading session on the Nasdaq Stock Market at $18.94, down $1.19, shares of Amazon fell an additional 81 cents in after-hours trading.

Amazon had earlier forecast $960 million in fourth-quarter revenue, but said it had benefitted from strong holiday sales despite the slowing economy.

"We've evolved a great deal in five years, and in 2000 we learned a tremendous amount about the operating characteristics of our model, while improving our bottom line each quarter of the year," Bezos said.

News of the layoffs, though widely rumored over the past few days, still was a shock, said Gretchen Wilson, an organizer with the Washington Alliance of Technology Workers, which is trying to establish a union at Amazon.

"Workers in customer service in Seattle have been really concerned. Every day this month, they've really been trying to engage in conversations with managers and supervisors about what the future is going to hold, whether there are going to be layoffs. Even this morning, they were being told, 'No, don't worry about anything,"' she said.

"I feel pretty terrible," said laid-off worker Toni Blasio, who worked in the Seattle customer service center for 2 1/2 years. "I helped build this company."

For all of 2000, Amazon reported a net loss of $1.41 billion, or $4.02 per share, compared with $720 million, or $2.20 per share, for 1999. Sales rose to $2.76 billion from $1.64 billion.

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