2HRS2GO: Wal-Mart can help Amazon, but just a bit

COMMENTARY--My, but aren't Amazon.com shareholders having fun today? It's almost like the old days, isn't it?

Amazon.com (Nasdaq: AMZN) shares shot higher this morning after the U.K.-based Sunday Times reported strategic talks between the Person of the Year and Wal-Mart (NYSE: WMT). Sounds too good to be true if you're a long-suffering shareholder.

Regarding the "true" part of that formula, only Amazon.com and Wal-Mart know for sure. But regarding the "good"--it's not really all that great. Wal-Mart can keep Amazon.com alive, but don't look for more than that.

Industry cliché long has held that Jeff Bezos' ultimate goal is to create an online version of Sam Walton's brainchild. Wal-Mart might be America's favorite place to shop, but Amazon.com would be the world's department store.

A deal with Wal-Mart makes sense from that perspective. It's reminiscent of something a CEO once told me a few years ago after rebellious shareholders forced his company to sell itself: "We wanted to get bigger, and we were going to acquire somebody and get bigger that way. We didn't get the chance to do it ourselves, but this also makes us bigger."

Likewise, Jeff Bezos can attain his dream of Retailer of All Things, but he can forget about supplanting Wal-Mart's stores. Exchange vows with them, instead.

Assuming Amazon.com and Wal-Mart are talking (and who knows if they really are?), don't look for an outright acquisition. Shares of Amazon.com trade far below their peak, but the company still carries a market cap of more than $4.5 billion. That's a hefty price tag for what amounts to a brand name and some expertise.

Last year's Toys "R" Us (NYSE: TOY) alliance set a precedent for Amazon.com. That deal salvaged the online toy businesses of both companies, and I wouldn't be surprised if that would serve as a model for Wal-azon.com.

That kind of deal would give Wal-Mart the top online retail presence, without having to spend too much. At the same time, it could provide Amazon.com with plenty of capital and back-end capacity, while leaving Jeff Bezos and his team sufficient autonomy. It's a victory for everyone.

And it would be the last shovelful of dirt on a dot-com dream that's already been lowered into the ground.

Partnering with Wal-Mart would be a good survival tactic, but it's hardly what people had in mind for Amazon.com. Even at the stock's current price of $12 and change, Amazon.com carries a richer valuation than other retailers, including Wal-Mart, Toys "R" Us, Target (NYSE: TGT), K-Mart (NYSE: KMT) and JC Penney (NYSE: JCP).

Yet if the Sunday Times report is true, Amazon.com essentially turns into the online arm of a larger entity. Though the companies would stay separate, Amazon.com's future would be tied directly to Wal-Mart's.

Amazon.com becomes nothing more than a larger version of BlueLight.com, without the endearing cheesiness and kitsch. Doing a deal with Wal-Mart merely confirms what everyone but Amazon.com's long-term shareholders have already acknowledged: Amazon.com, as an independent entity, is a failure. Online retail, like catalog retail, rarely stands on its own.

And if it doesn't stand on its own, it doesn't deserve a valuable stock price.

But Amazon.com has long been a favorite of short-term traders, and the Times report brought them out for one last hurrah. They drove the stock up, made a few bucks and got out, returning the stock to the short-sellers who held more than 30 percent of the company's outstanding float, as of a month ago.

So if you haven't profited from the partnership rumors by now, it might be too late. Rumor buyers rarely last more than a day, and this particular rumor offers little more than a way to keep Amazon.com alive while taking away Wal-Mart's online troubles.

It certainly doesn't promise a huge upside for Amazon.com. If Wal-Mart's brand were worth so much online, the retail giant wouldn't need to talk to Amazon.com in the first place. 22GO>