Troubled Webvan Bids Farewell to Founder

Webvan Group (Nasdaq: WBVN) will continue its fight for survival in the unforgiving online grocery business without its original driver.

The company announced Wednesday that Webvan founder Louis Borders had resigned from the company’s board of directors for personal reasons.

Webvan, like its e-tail brethren, has been dodging dot-com land mines in recent months. Morningstar.com analyst David Kathman expressed doubts about Webvan’s viability Wednesday, telling the E-Commerce Times that “I haven’t been optimistic about them for a while.”

Kathman said that he did not think Borders’ departure was “necessarily a big deal.” However, he added that “personal reasons doesn’t necessarily mean there can’t also be business reasons.”

Bud Grebey, a spokesperson for the Foster City, California-based company, told the E-Commerce Times that Borders informed Webvan’s board of directors of his decision to resign Tuesday night.

Grebey said he had “no indication” what Borders’ future plans were. Grebey added that the announcement did not come as a complete surprise because Borders had begun relinquishing day-to-day control of the company in September 1999, when he stepped down as president and chief executive officer.

Borders relinquished further control in September 2000 when he stepped aside as chairman of the board of directors.

Webvan in Neutral

Webvan started out in 1996 strictly as an online grocery store, then expanded to offer electronics, beer, household items and — most recently through a deal with PetSmart.com — pet supplies.

However, even as the company has expanded its product offerings, it has delayed expanding into new territory. The company announced in January that its planned expansion into northern New Jersey, Maryland and Washington, D.C. had been “indefinitely postponed.”

Kathman believes the company’s strategy of trying to be “all things to all people” may be hurting its bottom line. He pointed to the huge warehouses that Webvan had built as part of its expansion plans and said that because the company had not been getting the number of customers it had anticipated, the warehouses had become “big albatrosses.”

In addition to internal problems, Webvan has also had union problems. Earlier this month, the Teamsters and the United Food and Commercial Workers filed a National Labor Relations Board grievance, charging that Webvan illegally restricts organizing activities. At issue are personnel policies that allegedly prohibit employees from wearing pro-union buttons and restrict their ability to communicate and hold union meetings.

Critical Juncture

Webvan’s Grebey said the company was at a “very critical juncture” and would be focusing on growing its business over the next few months.

For the fourth-quarter ended December 31st, Webvan posted a loss of US$109.1 million, or 23 cents a share. By comparison, the company’s loss in the same period a year earlier was only $56 million, or 15 cents per share.

Webvan is not the first company that Borders built from the ground up. In 1971, he and his brother Tom opened a small bookstore in Ann Arbor, Michigan that grew into the Borders chain, which the brothers sold to Kmart in 1992.