April 23, 2001 8:10 PM PDT

Shaheen defends Webvan tenure

Add George Shaheen to the growing chorus of Old Economy executives who blame Wall Street for their Net companies' woes.

"I can only tell you that we did the best we could," Shaheen told CNET News.com on Monday. "Look around, this whole space got clobbered. No one foresaw what was going to happen."

Shaheen, who resigned 10 days ago after about 18 months on the job, said he hasn't spoken publicly about his role at the struggling online grocer since stepping down.

Rather than focus on Webvan's problems, Shaheen preferred to defend the company and the benefits of its service, such as "customers who tell me, 'Mr. Shaheen, I'm a mother or I'm a paraplegic and you can't let this company go down. I've gotten my independence back.'

"Sure you get the people that say, 'Why was the truck late?' or 'Why was it missing this or that item?' but people are crazy about this service and it's making a difference in people's lives."

Some former executives who worked with Shaheen, however, said Webvan's woes go well beyond late trucks and incomplete orders. They also questioned some of his decisions and his leadership style.

"George wasn't an operator," said one former Webvan executive who did not want to be identified. "He operated 20,000 feet above everybody else."

Added another former manager: "I liked him, but he was the wrong man, particularly of a public company. He would have been a great chairman."

Shaheen declined to respond to such criticism. "You want me to get into a 'he said, she said.' I'm not going to do it. There's always going to be someone who doesn't agree with what you're doing."

Some analysts said Shaheen's departure could hurt Webvan's chances to get new funding. His experience as a leader of an established and successful Big Five consulting company helped lift Webvan's credibility with investors when it first sought funding, they added.

Shaheen, 57, was one of the last high-profile, Old Economy executives who jumped to the Internet during the go-go days only to step down or move to other companies as stock prices crumbled. Among the other executives are Joseph Galli, who left Black & Decker for Amazon.com and later VerticalNet, and Heidi Miller, who left as chief financial officer of CitiGroup to go to Priceline.com.

Proven track record
However, Shaheen's leap from Andersen Consulting to Webvan in October 1999 was particularly noteworthy. At Andersen, he led the consulting firm since it became an independent unit in 1989, and during his tenure its revenue increased from $1.1 billion to $8.3 billion. For his success, he was paid an annual salary of $4 million.

At Webvan, Shaheen was paid a relatively paltry $500,000 per year and received an equity stake that proved worthless. But his ambitions were no less grand: to build an online grocer from the ground up that would operate in 26 cities within three years.

Unfortunately for Shaheen and Webvan's investors, that dream has proved elusive. Webvan's stock is now trading for about the price of a gumball sold in machines outside traditional grocery stores, and the company is scrambling to raise additional funds.

Nevertheless, "I'm proud of my contributions, and I came in and worked hard on a business model that was difficult to execute," he said.

Shaheen said repeatedly during Monday's interview that he didn't want to talk to the press, saying his words would be distorted and that "no one benefits if I talk."

Loose lips have hurt Webvan in the past. The Securities and Exchange Commission delayed the company's IPO shortly after Shaheen joined Webvan in 1999. The SEC was looking into reports that Webvan shared information with analysts that was not included in its prospectus.

After the brief delay, the IPO was launched in November 1999, with Webvan selling 25 million shares at $15 each, raising $375 million. The stock opened for public trading at $26, giving the company a market value of $8.45 billion, and the shares climbed as high as $34 on their first day.

Shaheen's comments Monday come as Webvan's fortunes have reversed course--to the point that the company is struggling to survive.

Trading on thin ice Webvan faces delisting from the Nasdaq; its new business plan shows the company running out of money by the end of the year; and a recent audit expresses doubt that Webvan can survive.

Webvan without Shaheen
On Monday, the board of directors met for the first time since Shaheen resigned. According to former Webvan executives and sources close to the company, the board was discussing who would lead the company. Robert Swan, the former chief operating officer and acting CEO, is widely considered to be the front-runner for the post.

Meanwhile, the company is scheduled to report a per-share loss of 19 cents Thursday for the first quarter, according to First Call.

Perhaps driven by speculation about Shaheen's replacement or the earnings report, Webvan stock was extremely volatile Monday. After closing at 6 cents Friday, the shares surged as high as 30 cents before closing at 16 cents. Volume topped 24 million shares.

Despite the interest in Webvan and whether it will survive a brutal e-commerce shakeout, Shaheen said he has grown tired of questions about the company's woes.

"The one I really love is, 'How do you feel about being delisted? What are you going to do?' What do they expect me to say? How do they expect me to respond? With, 'I'm going to jump off a cliff'?

"You do the best you can and work hard and that's all you can do," he said.

He added that despite leaving Webvan at a low point, he's not worried whether his reputation has been damaged.

"I have a track record and I've had a good career, but I don't care what anybody thinks about it," Shaheen said. "I did the job and the bottom fell out of the industry and that's all there is to print."

But Shaheen did say he hasn't made any immediate plans for his future.

"Is the phone ringing? Yes, the phone's ringing," he said. "What am I going to do? I don't know. I may not do anything. I'll make a decision and I don't have any idea how long that will take."

 

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