Amazon.com Has Undisclosed Plan
SEATTLE (AP) _ While some analysts this week encouraged investors to buy Amazon’s stock, critics are wondering if the company will even have enough cash on hand to operate the entire year.
So why is Jeff Bezos, founder and chief executive of Amazon.com and Time’s Person of the Year, still laughing?
``I’m just plain having fun at Amazon.com,″ Bezos said in an interview this week. ``I’m a change junkie, and I can’t imagine an environment more changing than the Internet in general and Amazon.com in particular.″
The e-commerce company, which began as a bookstore but is now selling most everything, is exactly where Bezos wants it to be. But as Amazon.com prepares to announce its fourth quarter earnings on Wednesday, investors still clamor for a sign pointing to future profitability.
Although the company is coming off its best holiday season ever, its stock is down about 40 percent from its all-time high of $113 per share set in December _ largely because the company warned of higher than expected losses. And like many Internet companies, it shows no sign of becoming profitable in the near term.
``I think if you look at the stock price, what investors are looking for is some direction on whether losses will continue to grow, or if they’re finally going to start shrinking,″ said Tom Courtney, an analyst with Banc of America Securities. ``Will this be the worst quarter that Amazon will ever see? Will this turn it around? The stock is telling you that people want answers to those questions.″
Amazon’s fourth-quarter sales are expected to total more than $650 million, compared to $253 million for the period in 1998 and greater than its $610 million in sales for all of 1998. But analysts are projecting a record quarterly loss of 48 cents per share, a figure that may top $159 million.
CIBC World Markets analyst John Segrich, who has been critical of Amazon’s lack of profitability, said Amazon’s spending rate is worrisome, though deals announced this week with drugstore.com and Greenlight.com may help the bottom line.
``They’re burning through cash very quickly,″ Segrich said. ``They may need to have more financing to get through the year unless they can make some changes.″
Bezos has a plan to become profitable in the long-term, but ask him what it is and you’ll get nothing but a grin and Bezos’ trademark belly laugh.
It’s not that Bezos isn’t worried about Wall Street. He worries about everything that has to do with the company he founded in 1995.
And indeed, one sign of belt-tightening came Thursday, when Amazon.com announced 150 people, or 2 percent of its workforce, would be laid off.
But it’s the customers that Bezos wants to impress. He speaks about Amazon becoming ``Earth’s most customer-centric company.″
``I ask everybody in the company to wake up afraid in the morning, but to be very precise of what they are afraid of,″ Bezos said, looking from his conference room at his employees. ``They shouldn’t be afraid of our competitors or investors but of our customers.″
Bezos’ refusal to show how he’s going to make Amazon a profitable company has alienated some investors, but Bezos is sticking to his guns.
``If some (investors) don’t want to be involved in a strategy that is that long-term, that’s OK,″ Bezos said. ``It’s not our job to convince people that they should think long-term. They get to decide that. That’s how this marketplace works, and it’s actually a pretty good system.″
Still, Bezos isn’t sitting back and waiting to see what happens. He showed that in November when he added four new product lines right before Christmas: software, video games, gift ideas and home improvement.
``Our strategy hasn’t changed at all, and it remains as it always was,″ he said. ``This model does work. This is an investment phase in this model and we’re full-steam ahead.″
That model has produced impressive results, if not an impressive balance sheet. The company boasts a customer base of 16 million people, which gives Amazon.com an asset that few other e-commerce companies can boast _ access.
Just this month, auto vendor Greenlight.com and online pharmacy drugstore.com paid Amazon.com for the privilege of having access to its customers. The Greenlight.com deal was worth $82.5 million over five years, while drugstore.com will pay $105 million over three years.
Deals like these led Goldman Sachs and other investment houses to upgrade the stock over the past week, noting that a few deals every quarter could push Amazon.com out of the red far quicker than expected.
``Those 16 million customers are a targeted group of people who have purchased online before,″ Courtney said. ``That’s probably the greatest asset Amazon has right now.″