April 24, 2001 12:55 PM PDT

Webvan to close Sacramento operations

Webvan will shut down its Sacramento, Calif., operation Saturday, a move that comes as the beleaguered company reorganizes after the recent resignation of its chief executive.

Webvan is closing the less-than-year-old operation and laying off 17 employees there due to the lack of customer demand and the high cost of delivering in the sprawling metropolitan area, spokesman Bud Grebey said.

The Sacramento closure was intended to bolster the chances that Webvan's Oakland, Calif., distribution center could reach a profit, Grebey said. Since Sacramento was an extension of Webvan's Oakland center, groceries had to be trucked from Oakland to the Sacramento warehouse.

The closure leaves the cash-strapped Webvan in eight cities, a far cry from the company's original plan to operate in 26 cities by 2001. The Foster City, Calif.-based company shut down its Dallas operations in February to cut costs.

Webvan, which had a whopping market value of $8.45 billion at the time of its IPO, is struggling to make a profit in any of its markets and is operating under a revamped business plan that anticipates the company running out of money by the end of the year. Former CEO George Shaheen resigned 11 days ago and the company is appealing a delisting notice from the Nasdaq.

The company's board of directors met Monday to map out the company's future, including a discussion of who would succeed Shaheen, sources close to the company said. Acting Chief Executive Officer Robert Swan is considered the front-runner by many, sources said.

In an interview with News.com on Monday, Shaheen blamed market conditions for many of Webvan's problems: "Look around, this whole space got clobbered. No one foresaw what was going to happen."

Webvan, the largest of the Net's home-delivery services, is one of the last companies in its sector. Last week, executives at PDQuick, a Los Angeles-based online grocer, told employees that the company will close its doors within weeks. Earlier this year, online convenience store Kozmo shuttered its operations and late last year Web grocers Streamline.com and ShopLink.com closed down.

The company's stock has been unusually active this week, trading at very high volume Monday to close up 166 percent at 18 cents. The stock jumped again Tuesday, trading as high as 30 cents. The company is scheduled to report a per-share loss of 19 cents Thursday for the first quarter, according to First Call.

 

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