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Webvan shops for a leader
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April 17, 2001: 3:26 p.m. ET
One of first old-economy execs to defect decides grocer needs new type of CEO
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NEW YORK (CNNfn) - As one old-economy CEO enters the new economy, another bows out.
Yahoo! (YHOO: down $0.40 to $17.22, Research, Estimates) hired Terry Semel, former head of Warner Bros. Studios Tuesday, just days after George T. Shaheen decided online grocer Webvan Inc. needs "a different type of executive."
Shaheen, who resigned Friday, was one of the first old-economy CEOs to defect to an Internet business. He resigned from a $4 million-a-year job as CEO of Andersen Consulting in September 1999, adding new excitement to Webvan's attempt to revolutionize the grocery industry.
But a year-and-a-half later, the company is struggling to stay afloat.
Shaheen's departure comes less than two weeks after Foster City, Calif.-based Webvan released a dismal annual report that included a warning from its auditor expressing "substantial doubt" about the company's ability to make it through this year.
In the annual report, Webvan (WBVN: down $0.03 to $0.07, Research, Estimates) said it probably will need to raise an additional $5 million to $15 million by this year's final quarter. All told, Webvan expects to have to raise as much as $60 million to stay in business long enough to meet its goal of turning a profit during the second half of 2002.
The company has lost $610.8 million since 1998, including $453.3
million last year.
A rival online grocer, Peapod (PPOD: up $0.04 to $0.98, Research, Estimates), nearly went bankrupt last year before receiving a last-minute cash infusion from Dutch retailer Royal Ahold. Online convenience store Kozmo.com closed last week, laying off 1,100 workers.
The gloomy outlook is reflected in Webvan's stock, which closed this week at 12 cents, a far cry from its all-time high of $34. The company has warned its shares are in danger of being delisted by the Nasdaq Stock Market if the stock doesn't start trading above $1.
Luring top execs in Internet heyday
To lure Shaheen from Andersen Consulting, Webvan paid him a $13.5 million signing bonus so he could buy 1.25 million shares of the company's stock, and provided him with an additional 15 million stock options. Those options had an exercise price of $8 per share.
Webvan paid Shaheen a $500,000 salary and a bonus of up to $250,000. His contract entitles him to two years of severance pay if he resigns "for good reason."
The company did not return phone calls requesting comment on whether it will pay Shaheen severance.
At the time Shaheen arrived at Webvan, he planned to lead an expansion that would put its delivery service in 26 markets by the end of 2002. The company has backed off that plan and is seeking to save as much money as it can in its nine existing markets: San Francisco, San Diego, Los Angeles, Sacramento, Chicago, Seattle, Atlanta, Portland, Ore., and Orange County, Calif.
Webvan bought out Kirkland, Wash.-based HomeGrocer.com Inc. last
year.
-- from staff and wire reports 
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