- guardian.co.uk, Thursday August 17 2000 00.00 BST
Starbucks, the coffee retailer, yesterday became the latest victim of the internet downturn when it was forced to write off a $20.6m (£14.2m) investment in a failed online venture.
Shares in the Seattle-based company were suspended in New York after the company revealed the extent of its involvement in Living.com, the online furniture retailer which filed for bankruptcy protection earlier this week.
The collapse of Living.com may reduce Starbuck's fourth quarter earnings by seven cents a share. Excluding the charge the company is expecting to make 22 cents a share for the quarter.
Starbucks said that it decided to write off 100% of its investment in the online retailer after Living.com announced that it would lay off 275 employees and liquidate its assets.
In a statement released yesterday, Starbucks said: "In recent months, companies in the internet and e-commerce industries have experienced difficulties, including difficulties in raising proceeds to fund expansion or to continue operations."
The company added that it still had some $43m invested in public and private internet and e-commerce companies. The statement offered a further note of warning to investors by adding that "Starbucks may conclude in the future that some or all of these investments warrant similar non-cash write-downs".
Shares in the company were expected to fall once the Nasdaq market reopened late yesterday. Wall Street analysts have previously criticised Starbucks' online plans as too ambitious. Their criticism, combined with that of some investors, prompted the management to scale back their plans over a year ago.
The company, which operates more than 3,300 Starbucks coffee shops in the US, Britain, Asia and the Middle East, was not available for comment yesterday. Its statement added that the write-down would not hurt earnings expectations for next year of between 90 and 92 cents.
Living.com was the second major casualty of the e-commerce sector in the past week, following the collapse of Value America's website.
Its collapse could also bring further pressure on Amazon.com, the online retailer which had a minority stake in the company and which has suffered from a crisis in investor confidence since April. Seven months ago, Living.com paid Amazon $145m as part of a five-year agreement to appear as a link on the larger company's home page. Amazon also paid an unspecified amount for its stake.
The loss of Living.com has stripped Amazon of its ability to offer online sales of furniture, though the company said it would continue to expand and find another partner in the near future.
Shares in Amazon, which are trading at about one-third of their all-time highs, remained largely unaffected by the travails of Living.com yesterday.
