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

To: who cares? who wrote (61737)	10/30/2000 3:46:08 PM
From: StockDung	Respond to of 122087

Amazon.com in the hot seat Merrill defends e-tailer against Lehman By Bambi Francisco, CBS.MarketWatch.com Last Update: 12:30 PM ET Oct 30, 2000 NewsWatch Latest headlines SAN FRANCISCO (CBS.MW) -- It appears that Amazon has taken the place of Yahoo as the dot-com in the hot seat. Shares of Amazon.com (AMZN: news, chart) lost 9 percent to $32 on continued concerns about the e-tailer's accounting practices. At issue is whether Amazon.com has inflated its cash position, as charged by Lehman Bros. bond analyst Ravi Suria. Recall that he's the same analyst who waved the red flag on Amazon's credit quality back in June. His June 22 report took shares from a high of $48 that week down to $33.88. But despite the calls for investors to take heed of his cautionary notes -- released last week -- investors instead bid up shares of Amazon by 16 percent for the week. Even so, his worries appear to be keeping a healthy dose of skepticism about Amazon in the market. Amazon is making accounting adjustments that inflate its cash position, said Suria. Amazon.com said it had $900 million of cash on its books, slightly below the $907 million it had in the previous quarter. But, based on Suria's analysis, Amazon conducted three transactions that added $173 million to its cash position. While allowed under accounting rules, the cash did not come from operations or financing, Suria said. On Monday, Merrill Lynch analyst Henry Blodget came out in defense of Amazon. In a note to clients, Blodget responded to the raised concerns by saying that he "remains comfortable with the company's calculation." The "difference of opinion appears to boil down to the distinction between cash flow from operations and free cash flow," said Blodget. Blodget is looking at cash flow from operations, which implies that Suria is looking at free cash flow. And, based on Blodget's calculation, Amazon's third-quarter cash flow was a negative $19 million. Amazon stated last week when it released third-quarter results and in its just released 10-Q filing, that it posted a negative $4 million in cash flow. That means the company is burning between $4 million and $19 million a quarter from operations. "We assume that other minor adjustments make up the difference between this and the reported number," said Blodget. The point being made, however, is that Suria is asserting that Amazon is burning cash at a far greater clip.