Amazon.flop. Will that be the final line for the Seattle-based retailer?
The company says, No, it’s electronic retailing business is on the way to profitability.
That’s the bright side of Amazon.com’s current difficulties: It acknowledges that profit still matters. But, in an echo of the "new economy" conceits, the company wants to measure profitability in a unique way, ignoring some costs traditionally included in profit-loss calculations.
Well, as they used to say back in the e-boom, whatever. Either this company will float or it will sink — based on the same rules of success as still govern the once-derided old economy.
In the year and a half since Time magazine crowned Amazon founder Jeff Bezos as Person of the Year, the e-commerce craze has disappeared. At startup companies, layoff notices are now handed out like stock options once were. Federal Reserve Chairman Alan Greenspan still seems to have a handle on the economy but the massive optimism about Internet companies floated off into thin air.
Gone is the belief that growth depends on betting huge sums of money on the future without first delivering a sound product. Home-grown pizza companies that grow one step at a time — think of Alfy’s — now look more like works of genius than, say, Pets.com or most of the other crashed e-tailers.
The changes in the psychology of Internet investing were illustrated graphically Tuesday. Late Monday, Amazon.com announced its most recent quarterly results and its projections for later in the year. In many ways, the news was positive: Amazon posted a smaller loss than expected for the second quarter of 2001 and its sales rose 16 percent. America Online also announced that it would invest $100 million in Amazon . The only downside was a lowering of the company’s revenue projections for the remainder of the year.
Two years ago, the company’s news might have been enough to send Amazon stock on a new upward flight and float the whole Nasdaq stock exchange bubble higher. That was then, this is now: Amazon stock closed down nearly 25 percent Tuesday.
Irrational exuberance is gone. The challenge before Greenspan and President Bush is to manage the economic slowdown without letting the country slip into recession. The challenge before Amazon is more basic economic survival. On both the corporate and national levels, economic success can only be earned, not spun out of well-articulated visions.
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