Cash Influx Revives Value America

Value America, Inc. (Nasdaq: VUSA) announced Thursday that it has received an equity investment of $90 million (US$) from two separate groups, putting the troubled e-tailer on track to reach profitability in 2002.

The company also reported a narrower loss for the first quarter, saying cost-cutting measures taken in December helped results.

The news gave a boost to Value America’s battered shares, sending them up 3/16 to 2 5/32 in early trading. Like many e-commerce stocks, the shares are far below their levels of last year. Value America went public in 1999 at $23 a share, and reached a high of 74 1/4 shortly thereafter.

Vulcan, Acqua Wellington Invest

In one financing agreement, existing investors Vulcan Ventures, Inc., Pacific Capital Group and FDX Corp. Chairman Frederick W. Smith will provide $30 million through the purchase of preferred stock.

Acqua Wellington North America Equities Fund Ltd. will provide up to $60 million more by purchasing common stock “at a small discount to market prices.”

Both sets of investors will also receive warrants to purchase Value America common shares.

Loss Narrows, Beats Estimates

The company said its net loss narrowed to $27.4 million, or 60 cents a share, from $34.5 million, or $2.72 in the year-earlier quarter. Analysts were expecting a loss of 70 cents. Revenue rose to $47.2 million from $28 million, which the company attributed to its cost-cutting plan.

Alliances reached during the quarter with such manufacturers as Palm, Inc., Cisco Systems, Inc. and Eastman Kodak Co. are also making a difference, Value America said.

Gross margin for the quarter was 8.6 percent, which the company said was in line with its “internal business plan.” The figure should reach 10 percent by year-end, according to the company.

Boom to Bust

The Charlottesville, Virginia-based Value America began as an online discount superstore, offering everything from computers to beauty supplies. However, the concept did not take hold, as advertising and other expenses soared and deliveries stalled.

There were also allegations of mismanagement, and a group of shareholders filed suit over the stock decline. In December, the company’s auditors expressed doubt that Value America could survive.

CEO Glenda Dorchak, who took over from co-founders Craig Winn and Rex Scatena, has been trying to turn things around. In an effort to improve operations, the company has cut costs and narrowed its product offerings to focus on computers and electronics.

The investments apparently came just in time, as the company was featured in a Business Week cover story on May 1st, titled “The Fall of a Dot-Com.”