Amazon.com Says Staff of Almost 800 Is 'Strain' (Update1) (Adds where analyst is based in the 4th paragraph.)
Seattle, June 26 (Bloomberg) -- Amazon.com Inc., the No. 1 online bookseller, says it has hired so many people in recent months that its management and financial resources are under ''significant strain,'' according to a regulatory filing.
While Amazon has warned all along that the need to build a staff will cause strain, the burden of proof on the company has never been higher. Its market value is almost twice that of Barnes & Noble Inc., whose revenue as the largest U.S. bookseller is almost 20 times that of Amazon.
Amazon's stock has increased about 10 times in the past year to 94 1/4 at today's close in part because some investors and analysts see the Internet-based retailer as having a cost advantage over bricks-and-mortar competitors such as Barnes & Noble. Yet even those who support the stock say that its rising payroll represents a challenge to becoming profitable. ''This is their greatest risk,'' said Nationsbanc Montgomery Securities analyst Steven Horen in San Francisco, who rates the stock a ''buy.''
Officials at Seattle-based Amazon declined to comment.
The money-losing company employed 796 people at the end of March, up from 158 just 15 months earlier. Its Web site currently advertises job openings for more than 75 positions, ranging from a software developer to a stock option administrator.
A large number of Amazon's staff fills orders, Horen said. If Amazon automates that process, it may be able to cut more costs, he said, its greatest opportunity. ''If they don't automate, they're vulnerable to a margin squeeze,'' he said. The more expenses a company has, the less profit it has left over.
The company disclosed the payroll growth and the difficulties they are causing in a filing with the Securities and Exchange Commission in conjunction with a recent bond sale.
Amazon, with sales of $147.8 million last year, has a market value of $4.5 billion. Barnes & Noble had sales of $2.79 billion in its most recent fiscal year, while Borders Group Inc., the No. 2 bookseller, had revenue of $2.26 billion.
One reason why some analysts and investors like Amazon and other Internet retailers is that they avoid costs such as real estate that other companies face.
Still, that may be misleading because Internet-based companies often have to hire high-priced software developers, for instance, said Nicole Vanderbilt, an analyst at Jupiter Communications, a New York-based Internet market research company. ''The lower cost is a myth,'' said Vanderbilt. ''With marketing and technology, the expense can be huge.''
Some aren't so bullish on Amazon's future.
The number of investors betting Amazon's stock would fall has soared in recent months, in tandem with the rise in Amazon shares. In May alone, the number of shares investors sold short rose 27 percent.
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