Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Internet Analysis - Discussion -- Ignore unavailable to you. Want to Upgrade?

To: Edwarda who wrote (282)	4/2/1999 3:40:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 419

Some interesting discussion from the Fool: fnews.yahoo.com Now if he could only tell us how Amazon can maintain a positive cash flow in the face of flat sales or a falling stockmarket I might become a believer in rehashed Ponzi schemes. --CTC Amazon could even use its cash hoard to support cutthroat pricing that drives competitors out of the market. On an operating basis, Amazon reported a FY98 net loss of $74.4 million, a gross profit of $133.8 million, and sales of $610 million. Even adjusting for tremendous sales growth, Amazon could afford to drop gross margins substantially without risking its future. Indeed, it may be one of the only companies for which such a strategy would not only not be suicidal but might even be smart. How many competitors could afford to suffer massive losses for years to come while simultaneously finding a way to eventually make money in a low gross margin environment where Amazon already enjoys a huge head start and greater economies of scale? To be clear, I'm not saying Amazon will pursue this strategy, only that it can if it must. However, Bezos probably will decide at some point that lowering gross margins makes more sense than increasing advertising spending, though these are really just two sides of the same coin paying for long-term market share. The main point is simply that e-commerce will likely remain a game of who can afford to lose the most money for the longest time while keeping investors convinced that its strategy makes sense. Keeping Wall Street hooked is really the only reason why any of these companies wants to turn a profit sometime soon. From a pure business angle, it would probably be smarter for Amazon to postpone profitability for another decade.