Amazon.com, the largest and best-known online retailer, will cut 1,300 jobs, or 15 percent of its 8,500 workers, in an effort to get into the black for the first time ever later this year.
Yesterday's announcement -- the first time Amazon has set a target date for profitability -- marks an about-face in the e-commerce giant's strategy of advocating growth over profits. Amazon appears to be trying to convince Wall Street that the company's long-term prospects remain strong, even after a year of dot-com carnage.
"It is now time for Amazon to start making money," said Barry Parr, director of research firm IDC in Mountain View. "We have left the land-grab phase of the Internet. Now companies are starting to build on the land they've seized."
After years of insisting that Internet firms operate by a different rule book, Amazon now is coming to grips with many of the realities faced by conventional firms.
"They're in retrenchment," said Jack Staff, chief Internet economist with Zona Research in Redwood City. "Amazon may be a pure-play Internet firm, but when it comes to distribution, they're just like a brick-and-mortar firm. They have to operate under the old rules -- trucks, people, warehouses and so on -- to deliver the goods."
Amazon yesterday reported sales and earnings for the fourth quarter of 2000 that were in line with Wall Street estimates. But the firm said growth in 2001 will be far less than it originally projected.
The Seattle-based company, which sells everything from books and CDs to electronics, toys and tools, said it expects 2001 revenues to grow by 20 to 30 percent, hitting $3.3 billion to $3.6 billion. That falls short of the company's previous projection of $4 billion in sales for 2001, and is a dramatically slower growth rate than in previous years. The company grew 68 percent in 2000 and 169 percent in 1999.
Amazon attributed the expected shortfall to the softening economy.
"The sales reduction is worse than everyone envisioned," said Jeetil Patel, Internet research analyst with Deutsche Bank Alex Brown in San Francisco. Like other analysts, Patel had been expecting revenue growth of 35 to 40 percent for the coming year. "There are some fundamental concerns that need to be addressed in the very near term."
Amazon will cut costs by shuttering a 450-person distribution center in McDonough, Ga., and a 400-person customer service center in Seattle. In addition, it will operate its Seattle distribution center seasonally, instead of year round, and will eliminate various unspecified positions throughout the company.
As a result, the company will fire 1,300 workers and take a charge of $150 million this year. In an unusual move, Amazon said that in addition to severance pay, it will put aside $2.5 million in stock for laid-off workers, which it will distribute to them next year.
Workers in the Seattle customer service unit being closed had been conducting a petition drive for unionization, a movement Amazon adamantly resisted.
"It certainly is convenient" that the department has been targeted for elimination, Parr said.
Organizers with WashTech, the Washington Alliance of Technology Workers, said they will call for an investigation into why the Seattle customer-service center was targeted.
"This shows the increased economic insecurities workers are facing in the new economy," said Marcus Courtney, co-founder of the Seattle labor group.
Amazon's workforce reduction comes after a year in which dot-com firms large and small have been shedding workers and shutting down. Amazon actually helped launch the layoff blitz a year ago, when it cut 150 jobs.
Amazon said it expects to achieve pro-forma operating profitability in the fourth quarter of 2001, which means it will make money from selling its goods online, but will not count any one-time charges or write-downs in the value of its assets, including investments. The company has already had to write off several disastrous investments in firms such as Pets.com, which closed late last year.
For the quarter ended Dec. 31, Amazon had a net loss of $545.1 million, or $1.53 a share, compared with a net loss of $323.2 million, or 96 cents, in the year-ago quarter. The loss for the fourth quarter of 2000 includes a $339 million charge.
On a pro-forma basis, excluding costs related to mergers and stock-based compensation, the loss was $90.4 million, or 25 cents. Analysts polled by First Call/Thomson Financial had expected a pro-forma loss of 26 cents.
During the crucial holiday quarter, Amazon sold $972.4 million worth of merchandise, up 44 percent from 1999's $676 million. The company added 4 million customers during the quarter, bringing its total to 29 million.
Sales may have been goosed by the company's offer of free shipping. During a conference call with analysts, Faye Landes of Sanford Bernstein asked Amazon executives how they would avoid having free shipping become "a drug consumers are addicted to."
Amazon Chief Executive Officer and founder Jeff Bezos said the company is sensitive to that issue, and considers free shipping a way of testing the waters to understand consumer behavior. "We won't let ourselves fall into a semiannual white sale trap, where you never buy sheets unless there's a white sale," he said.
For all of 2000, Amazon had a net loss of $1.41 billion, or $4.02 per share,
compared with a loss of $720 million, or $2.20, for 1999. Sales rose to $2.76 billion from $1.64 billion.
The results were announced after the market closed. Amazon's stock closed at $18.94, down $1.19 or 5.9 percent. In after-hours trading, shares dipped to $18.08. The company's 52-week high, reached almost a year ago, was $85.94.
E-mail Carolyn Said at csaid@sfchronicle.com
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