Magazine for Senior Financial Executives: Does Amazon deserve praise?

Does Amazon deserve praise?

Don Gonsalves

If you wanted to write about the IT side of Amazon (“Amazon Finally Clicks,” Spring) and leave it there, then fine. However, to make asinine comments about its financial performance in glowing terms is wrong. For a company to be in business 10 years and only earn $32 million, or 8 cents per share, on sales of approximately $4.8 billion is not brilliance but failure. All you are doing is adding to the Wall Street public-relations farce on Amazon, which is a big disservice to your readers. I would expect more from your magazine. Does Anthony Noto of Goldman Sachs [quoted in the article] ever stop to think that perhaps free cash flow is up because sales are up? The higher the sales, the greater the free cash flow but not necessarily profit. Amazon collects its money in two to three days after a sale because customers pay with credit cards, but does not pay its suppliers for 90 days or more; therefore, free cash flow is up, especially in the fourth quarter of the year. Why doesn’t he mention that to obtain these higher sales they had to give up some of their gross margins, which is why profits were far lower than they should have been? I do not own Amazon stock, nor have I sold it short, but I object to professional magazines becoming shills for Wall Street. We seem to be returning to the go-go days of the late ’90s with wild Wall Street analysts again. Amazon stock is owned by pure speculators, not investors.

Don Gonsalves | Retired CFO | Via E-mail

Editor’s note:

The article made it clear that despite the atypically good news on the financial front, Amazon faces an uncertain future. But a company’s profit margins don’t need to be huge in order for it to offer lessons to others. Some of those lessons, as you allude, may prove to be in what not to do, but we feel confident that Amazon deserves both attention and praise, not only for its IT strategy but for its business strategy as well.

COPYRIGHT 2004 CFO Publishing Corp.

COPYRIGHT 2004 Gale Group