Tech Industry

2HRS2GO: eBay and Amazon follow opposite paths

COMMENTARY -- As Amazon.com (Nasdaq: AMZN) falls, eBay (Nasdaq: EBAY) rises.

Amazon.com held its annual meeting with analysts yesterday. Judging by some of the research notes following the get-together, Amazon.com apparently spent a lot of time saying nothing notenoteworthy.

Oh, the company did throw out a revenue projection: 50 percent annual growth for the next 10 years. Various executives trotted out metrics that showed improving efficiency.

But when it comes to Internet companies, Wall Street only wants to hear about the bottom line these days. And that's where Amazon.com's specifics ended.

"There was no change in guidance or details on the current tone of business," said Banc of America Securities.

"Little news at analyst meeting yesterday," noted SG Cowen.

"Lack of visibility into long-term profitability," cited Merrill Lynch.

Most telling of all, none of the major brokerages saw any reason to change their ratings, whether optimistic or not. And in a bearish market, no news is bad news, so Amazon.com's stock is sliding. AMZN shares had fallen 2.8125 by early afternoon.

eBay (Nasdaq: EBAY), on the other hand, is one of the few gainers among the most active stocks today. The company is holding its analyst meeting today, and although the research notes haven't come pouring out yet, eBay put out a news release summing up its presentation.

(Amazon.com gets a small kudo over eBay on this one; Jeff Bezos & Co. webcast their spiel, as opposed to just cranking out a PR statement, although many people had trouble accessing it. Don't know why that's always a problem with Amazon.com's webcasts, but it has happened often in the past. Still, at least Amazon.com tried.)

On the face of it, eBay didn't say much more than Amazon.com did. The online auctioneer released a revenue projection similar to Amazon.com's, approaching 50 percent annually for the next five years.

But here's the difference: we know eBay can make money, because it has been making money ever since it went public.

The rub against eBay used to be that it lost money on its operations and made it up in interest income. That's not true anymore: the online auctioneer posted operating income of $9.2 million for the first six months of this year.

It's not a huge profit, but that's better than losing. It looks especially good because eBay has no large competition, either online or in the physical world. Amazon.com (Nasdaq: AMZN) will always compete with mall stores and their ilk; but there is no nationwide, let alone worldwide, seller of niche goods.

So when eBay projects increased revenue, we know it translates into increased earnings.

Bolstering its case, eBay today also repeated previously-announced margin goals of the mid-80s for gross income and 30 to 35 percent for operating profit. Those targets remain a mystery in the case of Amazon.com.

Other than that, eBay (like Amazon.com) seems to have spent most of the conference talking about various projects, which is fine. You're supposed to do that at these events; analysts need their eye candy as much as anyone else.

Yet flashy graphs and overflowing sentiment about expansion plans only pleases the audience when listeners already have confidence in the basic foundation of the business. That's not the case with every Amazon.com observer.

In a perverse way, I admire Amazon.com's management team for its ability to refuse Wall Street's clamor for a profit date. Jeff Bezos will do it his way, and stock market pressure be damned. Certainly anyone who bought into Amazon.com can't complain about the company; Bezos never promised much in the way of financial performance.

But after five years of operation, billions in public capital consumed and ungodly amounts of hype and publicity, the Amazon.com CEO may want to heed the market's call for earnings. Otherwise, why have analyst meetings at all?

You can just as easily put out a blank news release. And it's cheaper. 22GO>