Hi Eric,
Interesting series of posts; this thread needs more bears.
Amazon's style, however,
seems to be to say "trust us - profits aren't important now - we will
eventually prove ourselves and become profitable." They've been
saying this for five years. I don't believe that such an approach is
prudent, nor is it indicative of a CEO who feels a strong responsibility
to his shareholders.
IMO, comparing Amazon to a software company doesn't get you very far. From pre-ipo, it has been positioned as an infrastructure play, so more useful points of reference might be MCI in the early 80s or MFS more recently. (Amazon is, of course, richly valued even in these terms; I am long-term bullish, obv., , but am well aware that the 5-year chart may end up looking like ASND's. )
So far, Bezos has been able to raise the money he feels he needs without mentioning profits. As long as this is the case, managing for profits only spurs offline competitors to jump in faster/bigger with their online offerings and makes it easier for new entrants to raise capital. The failure to keep the stock price above the conversion price should, imo, be weighed against this.
If market conditions change dramatically over the next two-three years, I suspect Amazon will change its tune. Again, the changes infrastructure companies made to their business plans in order to appease their bankers during the early 1990s would probably be the closest parallel, though I honestly don't see the story unfolding that way. |
