PlanetRx lays off 70 workers to cut costs

Ailing PlanetRx.com has laid off 70 workers as part of a cost-cutting measure, the company confirmed today.


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."