Amazon.com, the leading online retailer, is to cut 1,300 jobs, or about 15% of its workforce, in an effort to become profitable by the end of the year.
The consolidation marks a dramatic departure for the standard-bearer of the new economy and underlines the bleaker environment for once high-flying online businesses.
Jeff Bezos, Amazon's founder and chairman, last night blamed the slowdown in the US economy for the decision to cut costs. "With the softening of the economy and especially in consumer confidence we thought it was prudent to take this difficult step," he said.
The company is to close a distribution centre in Georgia and a customer service centre in Seattle. The changes will lead to a charge of more than $150m (£102.5m) in the first half of this year.
Customer service employees have launched efforts to push for better working conditions in recent months. As part of the redundancy package announced yesterday, former employees will receive a trust fund of Amazon shares to be distributed in 2003.
The fall in Amazon's shares has left many employees with worthless stock options. Shares in the company closed down 6% yesterday to less than $18.93.
Amazon's shares fell in after-hours trading following last night's announcement after the company cut forecasts for this year's revenues from $4bn to between $3.3bn and $3.6bn.
In spite of this shortfall, which represents sales growth of between 20% and 30%, Warren Jenson, Amazon's chief fi nancial officer, made what amounted to the company's first promise toget into the black. "While the strength of consumer spending remains uncertain, and there are no guarantees, we expect Amazon.com as a whole to reach operating profitability in the fourth quarter of this year."
The company hopes that 2002 will be its first year of overall profitability.
Amazon was the leading proponent of the once-fashionable strategy of expanding fast at the expense of profitability to gain market share.
The company marginally beat earnings expectations for the last quarter of 2000 with a loss of $90.4m, or 25 cents a share. Wall Street had expected 26 cents a share.
International growth and the success of the company's electronics division helped push fourth-quarter sales to $972m, a 44% increase over 1999.
Earlier this month, Amazon announced that its revenues for the final quarter would be more than $960m. This announcement disappointed many investors, who had hoped for more than $1bn.
Mr Bezos yesterday denied the suggestion that the company would be forced to return to the capital markets to raise more money. "We don't need to raise cash for operational reasons," he said.
Several Wall Street analysts had expected the company to announce cost-cutting measures to achieve profitability last night. Jeetil Patel, analyst at Deutsche Banc Alex Brown, said: "The deeper the operating expense reductions, the better they will be regarded by Wall Street."
