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2HRS2GO: No leeway for Amazon.com these days

    Investors doesn't believe anything from Internet companies anymore.

    Online retailers and content companies lately have been beating the profitability drum. You can sum up their latest financial news releases thusly: "See? These metrics show we're closer to making money."

    To which the market has so far replied: "Closer means nothing. We want it now."



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    Today's shots featured the latest salvo of impatience. Amazon.com (Nasdaq: AMZN) came out with a quarter that pleased the majority of analysts.

    The company's revenue doubled year-over-year. Revenue per customer grew. Acquisition cost per customer fell. Gross margin improved. Fulfillment expenses dropped. The bottom line may have come in slightly ahead of the consensus estimate. And the company again pointed to earnings; books and music should post operating profits for the full year on a pro forma basis.

    Prudential Securities upgraded AMZN to "strong buy" from a "hold" rating. Salomon Smith Barney reiterated a "buy" recommendation. Donaldson, Lufkin & Jenrette maintained Amazon.com as a "top pick".

    Yet the market chose to follow First Union Securities, which downgraded Amazon.com to "hold" from "buy". Shares of AMZN have been mildly negative all day. As of early this afternoon, the stock traded at 53 1/4, down 1/4 for the session.

    A Wall Street obsessed with interest rates simply doesn't care anymore about profits down the road. Shareholders aren't impressed when losses per share skyrocket from a year ago.

    Amazon.com's boosters say focusing on losses embraces a foolish, short-term view that unfairly lumps Jeff Bezos' retailing giant with e-tailing dregs.

    "What you need to do is look over the horizon and realize that (Amazon.com) is turning cash flow positive here shortly," J.P. Morgan analyst Tom Wyman told ON24. "This operating model ... in our view is clearly working. And those that look at today's information and think that the model's broken need to kind of peel back some layers of the onion and they'll see that all the metrics here are going in the right direction."

    But investors don't want to peel anymore e-tailer onions. They want to eat them.

    Wyman doesn't expect Amazon.com to overcome broad market sentiments.

    "I think one of the tough things for Amazon over the next couple of quarters is just all the negative publicity revolving around other the e-tailers, the smaller e-tailers that are going to be exiting the business," Wyman said. "That dynamic's going to be tough, in terms of Amazon's stock making a hard charge."

    He believes things will clear up for Amazon.com by Christmas. But in the meantime, not only Amazon.com, but also the likes of eToys (Nasdaq: ETYS) are taking hits today. eToys also predicted profitability, but not until 2002. Too long to wait, said investors, many of whom followed up "So long, and see you later" -- ETYS shares have fallen more than 23 percent today.

    By contrast, the ones who are making money now are blasting ahead today. Software.com (Nasdaq: SWCM) turned its first quarter in the black and roasted the consensus estimate, and its shares shot higher today. eBay (Nasdaq: EBAY), which is profitable at least on a net basis if not an operating one, gained strongly, helped by a report showing its share of online commerce increasing.

    Amazon.com CEO Jeff Bezos is smart, so he won't let the market push his strategies around. With more than $1 billion in cash and marketable securities, Amazon.com can afford to post profits on its own schedule, rather than Wall Street's.

    But it doesn't make shareholders feel any better.

    Other issues:

  • Webcasts
  • I wasn't the only one who had trouble connecting to the streaming audio for Amazon.com's conference call yesterday afternoon, and this isn't the first time. Of all the major Internet companies, Amazon.com's live webcasts, hosted by StreetEvents, are harder to connect to than any other in my experience.

    Maybe Amazon.com also gets more traffic for these calls than other companies, but it ought to know that by now. Streaming audio technology isn't new anymore, and an Internet bellwether like Amazon.com ought to have the hang of it. 22GO>