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WebVan Scales Back, Names New Chairman

Webvan is delaying its expansion plans and, according to one report, could even scale back on the previously touted development of its New York City facility.

Research issued by Goldman Sachs noted that the online grocery and drugstore delivery service will benefit from delaying the opening of its Baltimore, Md., and New Jersey-based distribution centers.

The distribution centers, which were scheduled to launch during the fourth quarter of this year, are now expected to open their doors during the second half of 2001.

The delay will give Webvan time to focus on merger integration. The company merged with former rival homegrocer.com on September 5, 2000.

"Webvan will focus on generating cash flow from existing distribution centers," which will allow it "to be less dependent on the capital markets and, given the urgency of time to market is now lower due to decreased competition resulting from the homegrocer.com acquisition," according to Goldman's research.

Combined, the two companies posted losses of $103.7 million in the first quarter, with much of the losses coming from capital investments into new distribution centers, according to a New York Times article, published over the weekend.

The article also cast doubt on Webvan's plans to set up operation in 400,000-square-foot building in the South Bronx region of New York City. If the New York Times is correct in its predictions, the distressed South Bronx community will be devastated. The facility promised to open up 900 jobs within the community and Webvan had been offered more than $10 million in incentives to set up shop in that territory.

Webvan officials could not be reached for comment.

In addition, the company could also be waiting for new leadership to get its footing before taking any major steps.

Webvan today reported that its founder, Louis H. Borders, is stepping down as chairman of its board of directors. The baton has been passed to George T. Shaheen, the president and CEO of Webvan. Borders will continue as a director of the company.

"I whole-heartedly support George Shaheen assuming the chairmanship of Webvan," said Borders. "George is a dynamic and proven leader and I'm confident that in his role as chairman and CEO, he will continue to lead the company in accomplishing its mission to deliver the 'Last Mile' of e-commerce."

In addition to Borders and Shaheen, Webvan's Board of Directors is comprised of Jim Barksdale, partner of The Barksdale Group; David M. Beirne, general partner, Benchmark Capital; Christos M. Cotsakos, chairman and CEO of E*Trade Group; Tim Koogle, chairman and CEO of Yahoo! Inc.; Michael Moritz, general partner, Sequoia Capital; and Mary Alice Taylor, former chairman and CEO of HomeGrocer.com.