April 16, 2001 2:15 PM PDT

Troubled Webvan tests same-day service

Webvan is testing a same-day delivery service in Atlanta even as the troubled online grocer tries to boost business amid possible delisting, financial problems and the recent departure of its chief executive.

One of the last programs launched under George Shaheen, who stepped down as Webvan's chief executive on Friday, Webvan began offering same-day service to about 1,000 Atlanta customers as part of a 8-week pilot program, said Webvan spokeswoman Amy Nobile.

Webvan has continued to tweak its business strategy in its quest for profits. The Foster City, Calif.-based company, which is due to run out of cash by year's end, is under pressure to turn a profit in at least one of its operations so that investors might be more willing to back the company, analysts said.

Last week, Webvan executives informed employees that its Fullerton, Calif.-based distribution center had reached profitability, sources told CNET News.com. But in the wake of Shaheen's resignation, several analysts downgraded Webvan Monday.

"The only surprise in the announcement is that it has taken so long," Prudential Securities said in a press release Monday, as it reiterated advice to investors that they sell their Webvan shares. "Time is running out for this company."

The largest online supermarket, Webvan is the last of the Net-only home-delivery companies. Kozmo, the Web's best known same-day delivery company, shocked the sector last week when it shut down. Some analysts have said that home delivery of such consumer goods as groceries or videos is too expensive to be profitable.

Besides facing a shrinking sector and doubt about its business, Webvan could also be removed from the Nasdaq stock exchange for failing to meet the exchange's $1 minimum share price. Webvan was at 10 cents Monday, down about 16 percent in midday trading.

Webvan said that it expected to be notified by Nasdaq on Monday that Webvan would be delisted within 10 days. Webvan spokesman Bud Grebey said the company has decided to appeal the decision, allowing the company to stay on the Nasdaq at least another 45 more days to allow for the appeal process.

In the meantime, Webvan will tryout same-day delivery. Participating Webvan customers can receive groceries between 5 p.m. and 10 p.m. on the same day they order them, provided they order by noon.

Webvan's usual delivery times vary between 8 hours to a couple days, depending on the demand in one particular area.

"This is what customers have asked for," Nobile said.

 

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