>>I was and am not happy about blatent statements that amazon would be profitable if they stopped trying to grow. The statement has been proven to be wrong.<<
I don't recall anyone proving that statement to be wrong.
Here was the logic upon which I based the statement that Amazon could "pull the plug" and be profitable.
According to Amazon's recently released quarterly numbers:
Quarter Ended Nine Months Ended
Sept. 30, Sept. 30,
1998 1997 1998 1997
(Unaudited) (Unaudited)
Net sales $153,698 $37,887 $357,103 $81,747
Cost of sales 118,823 30,717 276,679 65,842
Gross profit 34,875 7,170 80,424 15,905
Operating expenses:
Marketing and sales 37,517 11,516 84,522 23,596
Product development 13,374 3,998 29,526 8,650
General and administrative 4,978 1,972 10,342 4,930
Merger and acquisition
related costs 20,512 -- 25,925 --
Total operating expenses 76,381 17,486 150,315 37,176
Loss from operations (41,506) (10,316) (69,891) (21,271)
Interest income 4,754 688 9,789 1,118
Interest expense (8,419) (19) (18,017) (59)
Net interest income (expense) (3,665) 669 (8,228) 1,059
Net loss $(45,171) $(9,647) $(78,119) $(20,212)
Basic and diluted loss per share $(0.90) $(0.21) $(1.60) $(0.48)
Shares used in computation
of basic and diluted
loss per share 50,234 45,865 48,700 42,438
Now, if you eliminate marketing and sales expenses of $37.5M and merger expenses of $20.5M, that is a total of $58M. Subtract from that the $45.2M loss, and that looks like a positive number to me.
I am not saying that it is REASONABLE to eliminate all marketing and sales expenses. We don't know how marketing and sales expenses are defined by Amazon. For example, do these include the expense of processing an order, or is that cost put in the G&A category?
It would be reasonable to assume that the vast majority of marketing and sales expenses would be comprised of advertising and promotion (Internet ads and promotions, print, radio and TV, etc.)
I can't imagine that Amazon spent $13M last quarter processing orders.
On another topic: Do you view eBay in the same way you view Amazon?
--Doug
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