Webvan: Once the Hunter, Now the Prey?

The shareholders of Webvan (Nasdaq: WBVN) are assembling Friday. It's not likely to be a happy occasion, since a share of the company's once impressive stock can now be had for about one thin U.S. dime.

We'll have to wait and see how shareholders react. Annual meetings are usually fairly polite events. Maybe investors find it difficult to flog the executives who they bet on with their own money. It would be like booing your team's best hitter in the midst of an 0-for-28 slump -- if you owned part of the team.

But Webvan's stockholders should call for action. And if they think long and hard about it, they might determine that they'd all be better off if Webvan were dead. Or at least if Webvan would play dead long enough for a smart scavenger to come along and consume it the way Webvan scooped up its competitors not so long ago.

Long Way Down

Webvan's fall from grace has actually been exaggerated by the company's own high-flying ambitions, which at one time included plans to build a cool $1 billion worth of warehouses. In reality, Webvan has spun its wheels for the most part, expanding its reach only to retract in the face of falling stock prices and diminishing prospects of additional capital.

That Webvan's ambitions were once high is probably pale comfort to the shareholders -- as was, no doubt, Webvan chief executive officer Bob Swan's comment to the Seattle Times to the effect that, well, Webvan doesn't have a vision for itself 10 years from now.

The question is straight out of Interviewing 101 -- we've all heard it from job interviewers, I'm sure -- and Swan couldn't answer it.

"That horizon is almost unfathomable," Swan told the newspaper.

He gets major points from me for honesty, but no doubt shareholders will have a follow up or two on that answer.

Tick, Tock

For instance, what is fathomable? Is raising the $25 million that Swan has repeatedly said the company will need to help it breakeven next year fathomable? And does reaching that target become more or less likely with each passing day and week?

Webvan hopes that time is on its side. It hopes that it can get close enough to profitability that even skeptical investors will be unable to refuse the temptation to sink an extra few million into a company that can't see 10 years into the future.

But the unspoken truth is that Webvan can't see the 10-year horizon because dark storm clouds are much, much closer.

A Nasdaq delisting, which could extinguish chances of raising more capital, remains a threat, and even a proposed 25-to-1 reverse stock split might not be enough to stave off that threat.

Square Peg, Round Hole

So is Webvan a lost cause? Hardly. It has its strong points. Lots of them.

It makes sure to get customer deliveries to the door within a 90-minute window, a rare example of top-shelf customer service in the Internet sector. Moreover, Webvan customers rave about the quality of the meat and produce the company offers, the wide selection of non-food items and the courteous delivery workers, who wear booties when they come into the house to protect the customer's floors.

And Webvan's groceries do not cost more than groceries picked up from the local brick-and-mortar store. Webvan's also got some pretty lucrative markets in its home territory on the West Coast.

But those aren't the ingredients for a business whose stock Mr. and Mrs. Investor will pass down to their grandchildren. Webvan is either a nice little niche company or a takeover candidate supreme.

Perils of Aiming High

There was nothing wrong with Webvan's ambitions. They fit the mood of the dot-com bubble. But post-burst, they're an anomaly. All that's behind those ambitions is a publicly traded company with a shrunken and narrowly defined market and no plans to expand again in the near or foreseeable future.

So at Friday's meeting, Webvan shareholders should act like baseball fans -- in one way. Instead of booing their sluggers, they should hold up signs when the cameras pan across their section.

And all the signs should say the same thing: "For Sale."

What do you think? Let's talk about it.