PlanetRx lays off 70 workers to cut costs
The ailing online drugstore lays off 70 workers, about 15 percent of its staff, as part of a cost-cutting measure, the company confirms.
PlanetRx, based in South San Francisco, Calif., also announced that chief technology officer James Chong has resigned. Chief executive Michael Beindorff said the cuts, which represent about 15 percent of the staff, will hit all areas of the company.
"It's never easy to lay people off, but we needed to maximize the investment of our shareholders," Beindorff said. "We looked at the least critical roles and decided which to cut. This will help continue growing this business at a healthy rate."
Once high-flying companies are now trimming their staffing or closing their doors. Almost on cue, market segments that analysts said were overcrowded and due for a shakeout--such as music, toys, pets, videos and online pharmacies--are almost all showing symptoms of that prediction.
Online music site CDNow and grocer Peapod both got last minute help earlier this year. Web toy stores Toysmart.com and Toytime.com ceased operations within the past three weeks. Reel.com shuttered its e-commerce offerings yesterday, and Pets.com acquired most of Petstore.com today--two weeks after Petstore laid off an undisclosed number of workers.
"This is the way it's going to be," said Gomez Advisors analyst Alan Alper. "Look at the companies that came out last year and are now struggling to find a big enough market to fulfill their aspirations. They are finding that maybe the market hasn't been created yet."
Among the Web's drugstores PlanetRx has had to tussle with well-heeled competitors such as Drugstore.com, and CVS.com. Amazon owns almost a 30 percent share in Drugstore.com after investing $30 million in January. In April, Amazon added a "Drugstore.com" tab to its Web site.
CVS.com, the Internet offspring of giant drugstore chain CVS, said in March that it expects the Web business to earn its first profits by 2002.
Benchmark Capital, a Silicon Valley venture capital firm, helped fund PlanetRx, a front-runner in the drugstore market since its October public offering, when it priced at $16 and shot up to $26 on its first day of trading.
Since then, however, PlanetRx's stock has fallen more than 80 percent. In afternoon trading today, PlanetRx was trading at $2.63, down more than 4 percent.
With its stock price down and without a wealthy brick-and-mortar partner--something Alper said is a powerful advantage--PlanetRx will have to fight to stay in the game against Drugstore.com and CVS, he said.
"Look at the companies that are faring well, and you usually find they have a strong physical world partner," Alper said. "The question is whether this is a standalone business that can survive on its own."