Amazon.com to cut 1,300 jobs

Amazon.com Inc., the largest online retailer, said Tuesday it will cut 1,300 jobs, or 15 percent of its work force, as this pioneer of Internet commerce looks to contain costs and make good on its promise to Wall Street that it would achieve profitabilty by the end of the year.

NOTE: This article has been updated since it was originally published in the newspaper.

In slashing jobs, Amazon becomes the latest major U.S. company to streamline operations in the face of a slowing U.S. economy.

News of the layoffs, and the decision to shut one distribution hub and one customer service center, came as the Seattle-based company posted fourth-quarter losses of $545 million, slightly narrower than expected.

Amazon CEO Jeff Bezos called the decision to lay off employees "difficult and painful," but "clearly the right business decision for us."

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Analysts who follow the company agreed the layoffs were a step in the right direction for Amazon, but said the company's road to profitability could be bumpy as its revenue growth projections were reduced.

"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.

Amazon.com 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 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.com became one of the first -- and biggest -- ventures in online retailing in 1995, dominating dominated 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.

Jeetil Patel, an analyst at Deutsche Banc Alex. Brown, called Amazon a "lagging indicator" of the struggles e-commerce is facing. "We've already seen the carnage taking shape over the past couple of months," Patel said, referring to the demise of well-known e-tailers such as Garden.com and Pets.com.

Patel was particularly concerned with Amazon's revenue growth projections for the upcoming year. He and other analysts were expecting revenue growth of 35 percent to 40 percent for the upcoming year, but Amazon said growth would likely be more in the range of 20 percent to 30 percent.

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

The layoffs will cause Amazon to take a charge in excess of $150 million this year.

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.

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, said Warren Jenson, Amazon's chief financial officer.

News of the layoffs, though widely rumored over the past few days, still were 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," she said. "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{ years. "I helped build this company."

Amazon said it expects sales of $650 million to $700 million in the current first quarter, while net sales this year are expected to increase between 20 and 30 percent over 2000.

At the high end of that expectation, the seller of goods ranging from books to home electronics, would record about $3.6 billion. Analysts originally had been expecting sales of about $4 billion for the year, but with the economy slowing, have been scaling back their estimates.

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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