Buy.com Plans Another Round of Job Cuts

Just two weeks after forcing out its top two executives, Buy.com reportedly has decided to lay off more than 40% of its 230 employees--the second round of job cuts this month for the struggling online retailer.

The Aliso Viejo company will fire about 100 people, sources told CNet News.com, a technology news service. Buy.com executives did not return phone calls Tuesday.

Internet retailers, touted as the future of shopping just a year or two ago, have fallen on hard times, particularly “pure” e-commerce sites that aren’t built on an existing business. On Monday, EToys said it will file for bankruptcy and advised shareholders its stock is worthless. It had tried without success to find a buyer.

Buy.com said at the beginning of the month that it was laying off 25 workers, about 10% of its staff then. Two weeks ago, Gregory Hawkins resigned as chairman and chief executive and Mitch Hill left as chief financial officer after the company failed to meet analysts’ financial expectations.

The company has lost $280 million in its three-year history, including $27.4 million, or 20 cents a share, during its fourth quarter. Buy.com attributed the departure of Hill and Hawkins to a “fundamental disagreement” between the executives and the board over the company’s direction.

For several months, observers have been questioning whether Buy.com can survive.

Morningstar analyst David Kathman said in October the company appeared headed for the “dot-com dustbin.” While Kathman acknowledged Tuesday that his prediction “may have been hyperbolic,” he added that “they’re in very bad shape.”

He noted that Hawkins had said last April that Buy.com would need to generate annual revenue of more than $2 billion to become profitable. Instead, the company expects its 2001 sales will be closer to 1999 levels than 2000. Buy.com revenue grew to $788 million last year from $597 million in 1999.

Until late last year, Buy.com concentrated on expanding its business, selling goods for less than it cost to acquire and deliver them. When it raised prices, sales fell.

The company’s stock, which traded as high as $27.50 a year ago, closed unchanged Tuesday at 41 cents on Nasdaq.

“They’ve just been bleeding, and they needed to do something drastic,” Kathman said. “And this is drastic. It will cut costs. But their real problem is just that their growth has completely stopped.”

Donald Kendall, a former PepsiCo Inc. chief executive, is now Buy.com’s chairman and a company director; James B. Roszak, is serving as interim chief executive.