Amazon.com Cuts 1,300 Jobs in Drive for Profitability

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Amazon.com Cuts 1,300 Jobs in Drive for Profitability Jim Milliot -- 2/5/01 *Sales in books/movie/video group rose 29% in 2000, with improvement in operating margin* In a move to help it achieve profitability by the end of the year, Amazon.com announced last week that it was laying off 1,300 employees, about 15% of its total workforce. The company will close its McDonough, Ga., distribution center, which will mean eliminating 450 jobs, and will also shut its Seattle customer service center, which will result in 400 job losses. Approximately 450 jobs are to be eliminated at Amazon's headquarters, and the company said it will operate its Seattle warehouse only on a seasonal basis. Warren Jenson, Amazon's chief financial officer, said the layoffs in its headquarters were across the board, although he noted that the company's software development team remains intact. Company chairman Jeff Bezos said the layoffs were painful, but were necessary if the company is to become profitable in 2001. And talk of profitability dominated the conference call between Bezos and Jenson and analysts. Jenson said the company is committed to achieving pro forma profitability by this year's fourth quarter, no matter what the economic situation is. The e-tailer is prepared to sacrifice revenue growth if that will help meet the company's bottom-line goals, Jenson said. "We are set to drive to profitability," Jenson said, adding that he expects Amazon to begin to see the savings from the layoffs in the second and third quarters, and that the company will work aggressively to make sure it holds on to those savings in future quarters. The company also lowered its expectations for total revenue growth this year to between 20% and 30%, which would push revenues to about $3.5 billion; earlier, Amazon had been forecasting total sales of $4 billion in 2001. Total sales for the company in 2000 increased 68.5%, to $2.76 billion, and its net loss deepened to $1.4 billion from $720 million. Some analysts expressed concern about Amazon's slowing growth, which the company attributed mainly to a sluggish economy. In the fourth quarter, revenues in Amazon's U.S. books/music/video (BMV) group rose 11.3%, to $511.7 million, compared to an 82% increase in 1999 over the fourth quarter of 1998. Sales for the group in the year increased 29.8%, to $1.7 billion. Bezos attributed the slowdown to a number of factors, including Amazon's decision to invest in international expansion, the introduction of new product lines and an extremely strong quarter in 1999. "We're not immune from a softening economy," Bezos said. Despite the slowing growth rate, the domestic BMV group had a pro forma operating margin of 7.6% in the quarter, and Bezos said one of the goals for 2001 is to make the group "solidly profitable." For the entire year, Amazon had a pro forma operating margin of 4.2% in its BMV group. Bezos said it was hard to predict what the actual growth will be for the group in 2001, but that he expects strong gains. He told analysts that Amazon will work on increasing sales from its existing customers and said he believes the BMV group can increase its segment share. Bezos and Jenson were reluctant to talk about any new initiatives planned for the year, although Bezos said some changes in its distribution operations, such as minimizing long zone shipments, would be made. The company will reduce its capital expenditures in 2001 to $120 million, from $135 million last year. "We won't be adding any new capacity this year," Jenson said. During the fourth quarter, 36% of Amazon's U.S. customers bought products from outside its BMV group, compared to 24% in 1999's fourth quarter. Bezos said that during the year, the company proved it could sell goods "beyond media products." With an increase in the types of products it sells and with international revenues jumping 128% to $381 million, Bezos said, Amazon is on its way to becoming "earth's first global retailer."

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Amazon.com Cuts 1,300 Jobs in Drive for Profitability
Jim Milliot -- 2/5/01
Sales in books/movie/video group rose 29% in 2000, with improvement in operating margin

In a move to help it achieve profitability by the end of the year, Amazon.com announced last week that it was laying off 1,300 employees, about 15% of its total workforce. The company will close its McDonough, Ga., distribution center, which will mean eliminating 450 jobs, and will also shut its Seattle customer service center, which will result in 400 job losses. Approximately 450 jobs are to be eliminated at Amazon's headquarters, and the company said it will operate its Seattle warehouse only on a seasonal basis. Warren Jenson, Amazon's chief financial officer, said the layoffs in its headquarters were across the board, although he noted that the company's software development team remains intact. Company chairman Jeff Bezos said the layoffs were painful, but were necessary if the company is to become profitable in 2001.

And talk of profitability dominated the conference call between Bezos and Jenson and analysts. Jenson said the company is committed to achieving pro forma profitability by this year's fourth quarter, no matter what the economic situation is. The e-tailer is prepared to sacrifice revenue growth if that will help meet the company's bottom-line goals, Jenson said. "We are set to drive to profitability," Jenson said, adding that he expects Amazon to begin to see the savings from the layoffs in the second and third quarters, and that the company will work aggressively to make sure it holds on to those savings in future quarters. The company also lowered its expectations for total revenue growth this year to between 20% and 30%, which would push revenues to about $3.5 billion; earlier, Amazon had been forecasting total sales of $4 billion in 2001. Total sales for the company in 2000 increased 68.5%, to $2.76 billion, and its net loss deepened to $1.4 billion from $720 million.

Some analysts expressed concern about Amazon's slowing growth, which the company attributed mainly to a sluggish economy. In the fourth quarter, revenues in Amazon's U.S. books/music/video (BMV) group rose 11.3%, to $511.7 million, compared to an 82% increase in 1999 over the fourth quarter of 1998. Sales for the group in the year increased 29.8%, to $1.7 billion. Bezos attributed the slowdown to a number of factors, including Amazon's decision to invest in international expansion, the introduction of new product lines and an extremely strong quarter in 1999. "We're not immune from a softening economy," Bezos said. Despite the slowing growth rate, the domestic BMV group had a pro forma operating margin of 7.6% in the quarter, and Bezos said one of the goals for 2001 is to make the group "solidly profitable." For the entire year, Amazon had a pro forma operating margin of 4.2% in its BMV group. Bezos said it was hard to predict what the actual growth will be for the group in 2001, but that he expects strong gains. He told analysts that Amazon will work on increasing sales from its existing customers and said he believes the BMV group can increase its segment share.

Bezos and Jenson were reluctant to talk about any new initiatives planned for the year, although Bezos said some changes in its distribution operations, such as minimizing long zone shipments, would be made. The company will reduce its capital expenditures in 2001 to $120 million, from $135 million last year. "We won't be adding any new capacity this year," Jenson said.

During the fourth quarter, 36% of Amazon's U.S. customers bought products from outside its BMV group, compared to 24% in 1999's fourth quarter. Bezos said that during the year, the company proved it could sell goods "beyond media products." With an increase in the types of products it sells and with international revenues jumping 128% to $381 million, Bezos said, Amazon is on its way to becoming "earth's first global retailer."