Webvan reaches the end of the road

NEWS Online grocer Webvan has closed its doors for business and is filing for Chapter 11 bankruptcy protection confirming speculation this week that it was shutting up shop. The news marks the end of the line for a firm that was for many was the epitome of the dot-com boom, and accordingly, the latest victim of dot-com gloom. The California-based firm has stopped taking orders in all its markets, with the loss of 2,000 jobs. CEO Robert Swan said he has no plans to salvage any of the business, and told US journalists this morning he intends to pursue an orderly wind-up of operations. Webvan's share price dipped at six cents on Monday morning, after debuting at over $25 at the end of 1999. Despite being just three years old, its IPO gave it a valuation of over $8bn, a value based entirely on massively ambitious revenue projections and the over-exuberance of the boom days. At the time it had only recorded $2.5m worth of sales in its three years of existence. In the heady climate of late 1999, Webvan's 80 per cent leap in share price on its IPO was viewed by many analysts as disappointing. Those were the days. Founded by Louis Borders - the respected entrepreneur behind the Borders chain of bookshops - the company's board managed to poach George Shaheen, then CEO of Andersen Consulting (now Accenture), with the lure of dot-com millions. After raising $1bn from the market and private investors, Webvan's spending made boo.com look like penny-pinching. It spent the cash building a distribution network to deliver groceries throughout the US. At the time it thought it would be selling over $500m of goods a year by now, the reality has been only half that. More fundamentally it has also been hit by higher than expected costs and the complete reversal in investor sentiment toward dot-com firms, making it impossible to raise more money from the markets. By the start of 2001 it became clear the company was in trouble as it started closing down operations some locations. In February the founder Louis Borders quit, and in May Shaheen followed him. Despite being unable to rescue the company, Shaheen was canny enough to ensure a severance deal which will continue to pay him $375,000 a year for the rest of his life. Jeffery Mann, VP at analyst house Meta Group, said the firm's failure is the ultimate example of what went wrong in the dot-com boom He told silicon.com: "These guys thought they could come along and show the established players how it was going to be done from now on. They were wrong. They just shovelled money out one door as quick as it came in the other."