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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: johnsto1 who wrote (61663)	10/28/2000 12:50:49 PM
From: StockDung	Read Replies (1) \| Respond to of 122087

Herb, Part 1: Where'd the Money Go at Amazon? By Herb Greenberg Senior Columnist Originally posted at 6:30 AM ET 10/27/00 on RealMoney.com Lehman Brothers convertible bond analyst Ravi Suria, who caused a stir with his recent report questioning whether Amazon.com (AMZN:Nasdaq - news) had enough cash to survive, is back. This time he doesn't buy the quality of the $900 million Amazon claims it had in cash and marketable securities at the end of last quarter. As I noted on the Columnist Conversation on Thursday, he's specifically dubious about the whereabouts of $96 million that came from reclassifying stock in Webvan (WBVN:Nasdaq - news) and Sotheby's (BID:NYSE - news) from "other investments" to cash and marketable securities, $20 million received from the sale of inventory to Toys R Us (TOY:NYSE - news) and $57 million (not yet recognized as revenue) received from Amazon Commerce Network partners. "The three add up to $173 million, and clearly none of these came from operations," Suria says. "The company spent $42 million in capex [capital expenditures] that it recognized, and disclosed that it had no other significant investing or financing cash flows. So the question becomes: Where did the $173 million go? As the money did not go into investing or financing, it quite possibly went into operations -- which means that the negative operating cash flow was possibly $173 million greater than the $4 million that the company reported." Why shouldn't it have gone into cash? Because, according to Suria, Webvan's stock is trading for less than $1, and would be difficult to sell; therefore it shouldn't be a cash equivalent. The $20 million received from the inventory sold to Toys R Us is a one-time sale that is a transfer of two items on the balance sheet. "It doesn't flow through the income statement." And the $57 million in unearned revenue is just that: unearned. "It doesn't become operating revenue until you recognize it as revenue," says Suria. Each of his items generate quite a bit of disagreement, especially the last one about unearned revenue. Merrill Lynch analyst Henry Blodget, who called yesterday after seeing my Columnist Conversation item, goes so far as to say he believes all of the cash can easily be accounted for on Amazon's balance sheet and income statement. He adds that if Suria has any beef it should be with the Financial Accounting Standards Board, because Amazon is merely trying to abide by FASB rules. Adds an Amazon spokesman: Suria is "speculating and coming to factually inaccurate conclusions. The [operating cash flow] number that will be in the 10-Q will be the negative $4 million. If you ask where did the cash go? It went into the bank, and that's why it's listed as cash and marketable securities." The reclassification of the Webvan and Sotheby's stock, he adds, was required by Generally Accepted Accounting Principles, and Amazon's contention regarding the cash it received for the Toys R Us inventory "is an ongoing operating program for us ... and this is money generated by ongoing operations that went into the bank. The operations didn't burn more than $4 million, and the 10-Q will make that perfectly clear." That may be the case, but Suria says that no matter what the numbers show, something isn't quite right. Stay tuned for Part 2 later today, which has nothing to do with Amazon.