IT Gets Blamed for Overstock.coms Earnings Plunge

When Overstock.com reported a weak fourth-quarter earnings report, top management pointed the finger squarely at IT.

When Overstock.com reported a weak earnings fourth-quarter earnings report on Feb. 5 (revenue down 6 percent, gross profits down 16 percent, a $97 million loss for the year), top management pointed the finger squarely at IT. Its unusual for a company to blame a loss on technology management, but Overstock has done it before.

"We lost $41 million for the quarter and $97 million for the year," said Patrick Byrne, Overstocks chairman and CEO, in a statement. "We paid the price for hastily implemented system upgrades of 2005 and the subsequent troubles caused by them."

Byrne said the system upgrades—involving the integration of an Oracle database and a Vcommerce database—were partly cursed by bad forecasting.

"We built the infrastructure to handle continued hyper-growth just as it ended. We recognize that the days of hyper-growth are behind us and that our poor execution of the building of our infrastructure contributed to the end of that hyper-growth," he said.

"Weve reduced our headcount and weve terminated an expensive computer facility co-location lease. We are in the process of significantly reducing additional facilities lease costs and other expenses."

/zimages/6/28571.gifClick here to read more about Overstock.coms technology shortcomings.

The CEO did pay one compliment to IT, although it could be seen as slightly back-handed.

"The poorly implemented system upgrades that caused so much trouble last year hummed through this Q4, like well oiled machines, and I couldnt be happier about that," he said.

Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.

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