>Mercury News
A group of Wall Street analysts is stepping up pressure on Amazon.com to be more accountable and more open with shareholders about its financial situation.
Earlier this week, the group associated with the New York Society of Security Analysts (NYSSA) sent a letter to Amazon's board members asking for their views on a range of issues facing the e-tailer before the directors come up for re-election at the company's annual meeting later this month.
Among the 10 questions that a forum held by the society's Corporate Governance & Shareholder Rights Committee is asking Amazon board members to answer: What information do you rely on to assure the company's financial viability? How will you assure the reliability of information provided to investors? How will you assure effective review of proposed business combinations?
The letter, the latest of several that the group has sent to the company's board and management, comes amid skepticism about Amazon's viability, high debt levels and continuing losses. Some analysts and shareholders also have questioned whether Amazon is releasing enough financial data to enable investors to reliably assess the company's prospects.
In addition, Amazon faces two shareholder lawsuits contending it failed to disclose that its investments in several smaller e-tailers -- such as Pets.com and Living.com, both now defunct -- were losing millions of dollars.
``We see Amazon as a test demonstration of the ability of shareholders to hold board members accountable and to demand information,'' said Peter Brennan, a member of the NYSSA and chairman of the society's corporate governance committee. The NYSSA is a non-profit educational group with more than 7,000 members.
A key goal of the committee's forum is to establish standard measures to track Amazon's financial progress.
Gary Lutin, an investment banker in New York who is co-sponsoring the forum, said the group chose to focus on Amazon because it is a leader in the Internet sector. The group also selected Amazon because its use of measures like ``eyeballs'' and pro forma earnings and losses -- which exclude an array of items such as stock-based compensation costs -- is typical of many online companies.
``They are typical of the dot-coms' loose use of metrics . . . everything from fantasy numbers to made-up things that are undefined from company to company,'' Lutin said. ``Our goal is to restore reality-based standards.''
He added, however, that he was encouraged by Amazon's latest earnings release, which included details on how to reconcile the pro forma numbers with results based on standard accounting principles.
Still, the forum remains concerned about what it sees as inadequate information from Amazon on other issues, including the company's dismissal of a February report by Ravi Suria, then a Lehman Brothers bond analyst, warning that Amazon faces a liquidity squeeze. Lutin said Amazon claimed the report was ``full of errors,'' but has refused to identify the errors.
Although Amazon Treasurer Russell Grandinetti was initially involved in the forum when it was formed in July, the company stopped participating early this year and has not responded to several recent letters sent by the group. Amazon would not comment on the latest letter.
The forum, meanwhile, has invited Amazon board members to respond to its latest letter at a meeting scheduled for Thursday, ahead of the company's annual meeting May 23. Amazon shareholders will vote on re-electing those directors at that meeting.
At least one sell-side analyst who follows Amazon, but did not want to be identified, questioned the forum's credibility and noted that its views do not represent the views of all members of the New York Society of Security Analysts. |
