DO AMAZON'S EXECS LACK CONVICTION?
SAN FRANCISCO (CBS.MW) - All the proposals to bring back confidence in CEOs and the companies they lead, from prison terms to formal explanations of pay packages, will never eliminate the temptation to place executive compensation ahead of a company's well being.
But at least one confidence-booster is available in the actions of corporate leaders. We've all heard that saying, "Action speaks louder than words."
For my money, I'd be more inclined to look favorably on a company if its executives gave us a clear look at their buying intentions, rather than the profit or revenue threshold they think they're going to hit.
To be sure, executives haven't been the pillars of omniscience when it comes to what business conditions, and certainly not stock prices, will be like in the coming months.
But at the very least, if insiders are buying shares, it could make us
reconsider why we're so negative about the company. Insider buying, after all, has been a good indicator in the past.
If so, we may have more worries ahead. We haven't seen any major buying since the immediate aftermath of September 11th. As one insider-buying tracker said: "It's absolute anemic, pathetic insider buying into the market weakness."
That's as true at Amazon.com as anywhere else.
Estimates of pro forma numbers for Amazon.com, compiled by Thomson Financial/First Call, show an expected quarterly loss of 6 cents a share on sales of $789 million. Amazon.com is also expected to lose 2 cents for 2002 and generate $3.67 billion in sales for 2002 and $4.1 billion in 2003. On a generally accepted accounting principles basis, at least one analyst estimates that Amazon.com will lose 10 cents per share.
If those sound like unappetizing prospects, insiders apparently agree. Those who are left, anyway.
In the case of Amazon.com (AMZN), not only is insider buying activity practically non-existent, selling activity has been the theme in recent months.
Amazon.com CEO Jeff Bezos sold 2.2 million shares in 2001 and 950,000 shares in May of this year.
Richard Dalzell, an officer of Amazon.com, has sold 360,000 shares this year at different times. He's been quite a bit more active than previous years.
Mark Britto, Amazon.com's senior vice president of sales and business development, who owned 239,998 shares at a strike price of $13.37, as of Amazon.com's April 18, 2002 filing, owned just 155,900 shares in early May. In June, Britto left for another Internet company.
Jeffrey Wilke, an officer of Amazon.com, who held 240,000 shares at a strike price of $13.37 as of the April 18 filing, sold 109,880 shares in May.
Dave Risher, Amazon.com's marketing executive, sold 300,000 shares this year. Risher left Amazon.com late last year.
In March, Amazon.com CFO Warren Jenson left his post as CFO. In May, Jenson sold 279,166 shares, for about $4.8 million. According to an SEC filing.
Jenson holds options for 346,000 shares at an exercise price of $13.37 and 100,000 at a price of $8.55. The options begin vesting in August and fully vest in February 2003. Jenson also holds options for 1.2 million shares at an exercise price of $7.93.
Arguably, Jenson and the others should be compensated for their roles at Amazon.com. The stock is up 40 percent this year, vs. a 35 percent slide in the Nasdaq.
But it is still troublesome to see the executive team at the
Seattle-based retailer unload with regularity with very little commitment to buying.
It's disconcerting to see after years of toiling at an unprofitable company that three top executives -- the chief finance executive, chief marketing and chief sales guy -- would call it quits just as Amazon.com hit its profitable quarter last December. Are these guys leaving while they're on top, or perhaps when the stock is at its top, or just when their options are in the money?
If the stock was such a compelling buy, then maybe executives would stick around and stop stepping on the eject button.
Even last September, when insider buying was prevalent, there waslittle if any action on the part of Amazon.com insiders to jump in and buy shares.
Perhaps, all this isn't new. But neither is the fact that Amazon.com has a lot of debt, trades at a high multiple relative to other retailers, and has made a profit in one quarter of its life.
So if there is any incremental information that might make any difference to this company's shares, maybe it's not whether executives raise this year's outlook, but whether executives put their money where their outlook is. |
