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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (33915)	1/9/1999 7:43:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 2 [Note to readers: Back issues of The Internet Capitalist can now be viewed (and printed out for friends and family) on SG Cowen's Web site at www.sgcowen.com/rs/rs5.html.] The Week No Need To Shout; The Lesson Of Whisper Numbers News from Amazon earlier this week that they would report a Q4 revenue number of $250 million (that's 63% sequential growth from September's $154mm) versus our high-on-the-Street $192 million revenue estimate for the December quarter, came as quite a shocker, on two fronts. First, we were shocked because of the magnitude of the upside; sure we were as optimistic as the next sell-side Internet analyst (actually, for the record, we were much more optimistic), but this $250 million number was huge. The second shock came from the almost instant feedback we starting hearing from some buy-side clients that the whisper number, that unofficial expectation (hope) for Amazon's quarter, ranged anywhere from $300-$350 million in revenue (we're embarrassed to write even the most aggressive number we were quoted). That is, some investors were of the mind that Amazon would grow their revenue something like 100% quarter-to-quarter. The magnitude of that expectation, the certainty that Amazon would not only out-perform but massively outperform, was indeed shocking. To that adjective we would add disconcerting. Not surprisingly, the stock opened (“gapped” is actually the proper term) down on this “dissappointment” and various (jaded) sell-siders were quoted indicating that Amazon's Q4 performance was merely ho-hum; "on the surface [it] isn't bad news…it's not that big a deal" said one. Though Amazon's stock eventually came back quite strong (mostly on the buying power of retail investors who rightly view such a performance as staggering for a retailing concern), the whole event got us to thinking about expectations and reality, and the implications that this object lesson holds for the remainder of the Internet universe over the month of January as these companies report their December quarters. Over the years we've formed lots of opinions about the public capital markets, many of them formed in early childhood reading from the pages of Grant's Interest Rate Observer (thanks, Jim Grant). A few of these ideas were formed around the edges of the belief that markets tend toward cycles, cycles of excess and scarcity, that create their own undoings. That, for example in the bond markets, bankers would extend too much credit to too many unworthy creditors and thus create the very conditions that would later be their undoing; non-performing debts. Though we hold it dear to our Cartesian hearts that it's generally unsafe to draw a line through one data point, we may be at the beginning point of the Internet universe's near term undoing; unreasonable expectations, as evidenced by an almost completely maniacal notion that Amazon would have a $350 million+ December quarter. As we've been marketing to buy-side institutions over the last few week, we've been finding ourselves suggesting with increasing frequency that the Street may be perilously close to the point where whisper numbers for the Internet universe are physically impossible to hit; that growth has been so strong and previous quarters' results (mostly top line) beaten so handily, that the December quarters for some of these Internet companies may not be even capable of coming near the outsized