Two More Quit Board of Foundering Buy.com
Struggling online retailer Buy.com Inc. said Thursday that two directors from its largest institutional investor have resigned, leaving the Aliso Viejo company with four empty board seats.
William L. Burnham and Scott Russell, both of whom work with affiliates of Softbank Corp., said in a Buy.com press release that they resigned to help manage a growing portfolio of Softbank investments.
Softbank, a Japanese investor in technology companies, owns 28% of Buy.com. Only founder Scott A. Blum has more stock. He left the company 19 months ago before it went public and put his 50% stake in a voting trust controlled by outside directors.
The departures come about two weeks after Buy.com announced that Jonathan Firestone, former president of BBDO Minneapolis, and Charles “Bill” Richion, a retired Hewlett-Packard Co. senior vice president, resigned from the board.
At that time, Buy.com’s chief executive, Jim Roszak, said a smaller board would be more effective as the company tries to turn a profit.
The board now consists of Roszak, a former Transamerica life insurance executive; Donald Kendall, a retired PepsiCo Inc. chief executive who is chairman of Buy.com’s board; Sanat Dutta, a former Ingram Micro Inc. executive vice president, and Wayne Thorson, chief executive of construction firm Thorson Inc.
The departures also put more pressure on a company in such turmoil that some analysts have questioned whether it can survive.
Two months ago, the company reported declining sales for the fourth quarter and a wider-than-expected loss of $27.4 million. It also announced major cutbacks aimed at conserving cash. Shortly afterward, Gregory Hawkins quit as chairman and chief executive and Mitch Hill left as chief financial officer.
Sales Took a Dive When Prices Went Up
Buy.com’s strategy was to build a brand and customer base by offering very low prices on software, electronics, books and other items and then begin raising prices on high-volume products to boost gross margins. But when the company started raising prices, its growth screeched to a halt, analysts said.
The company said in February that it expects annual revenue, which hit $787.7 million last year, to shrink by at least 25% this year because of a slowing economy and weaker sales of computer products.
The company also said then that its cash reserves had dipped to $67.4 million. It was burning through about $20 million a quarter, but the company said its efforts to stem the red ink should cut that rate to $20 million for the entire year.
On Thursday, Buy.com issued a separate release saying that it has been ranked fifth among all e-retailers by Fairchild’s Executive Technology, a trade publication. The company said it has served 3.5 million customers.
Buy.com went public Feb. 8, 2000, amid an investor frenzy for almost any dot-com. The shares hit their highest point--$27.50--the next day, but since have plunged to penny-stock status, closing at 22 cents a share Thursday, unchanged from Wednesday.
Last month, Nasdaq gave the company until May 31 to get its stock price above the minimum $1 a share required to remain listed.
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Bloomberg News and Dow Jones Newswires were used in compiling this report.
