----- Original Message ----- From: nettime's_roving_reporter <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Monday, October 18, 1999 12:15 AM Subject: <nettime> Dow Jones down by 1,266 points > <http://www.nytimes.com/library/opinion/friedman/101799frie.html> > > October 17, 1999 > > FOREIGN AFFAIRS / By THOMAS L. FRIEDMAN > > Reality Bytes > > Is this a story we will read sometime in the next year? > > NEW YORK (NYT) -- The Dow Jones industrial average dropped 1,266 > points today after Amazon.com announced that it had inadvertently made > a profit. > > After years of having persuaded investors that its business model > called for it to consistently lose money until it had built up its > market share, Amazon stunned Wall Street by announcing earnings of 1 > cent per share this quarter on sales of $1.1 trillion, or 10 percent > of U.S. G.D.P. > > The reason these earnings rattled Wall Street was that investors began > to realize that no matter how big Amazon's market share became its > profit margins were going to remain razor thin because it is now > competing with everyone -- not just booksellers. And therefore its > market capitalization -- the company is valued at more than Fort Knox > -- was simply not sustainable. > > "Pie in the sky is always great as long as the pie remains in the > sky," said one Wall Street broker, "but when the pie actually comes > down to earth and you get to see what a real slice looks like -- well, > you have a problem. Amazon's whole strategy was to keep the pie in the > sky. But now they've blown it by accidentally making a profit." > > The Seattle-based Internet retailer issued a statement following its > quarterly earnings report, saying: "The Amazon board wants to > apologize to shareholders for completely missing its quarterly loss > target and inadvertently making a profit. The board has been assured > by management that this problem will be rectified in the coming > quarter. Amazon intends to increase both its advertising budget and > the number of books it will sell at a loss to insure that it returns > to unprofitability by the next quarter. Our shareholders can rest > assured that our primary goal remains market share and our business > motto remains: 'Amazon.com: We took the 'E' out of P/E.' " > > Said one Wall Street Internet analyst: "Look, I believe the Internet > changes everything. I've taken the Kool-Aid. But I think the question > of whether Jeff Bezos [Amazon's founder] will ever make the massive > profits that his stock price implies is really uncertain." > > It will depend on at least three things, the analyst said. The first > is, Are Amazon's competitors dead or are they just behind? Has Mr. > Bezos killed Wal-Mart, Barnes & Noble, Best Buy, Borders, Toys "R" Us > and Circuit City -- all of which he is now competing against? Or, has > he just showed them the power of the Internet as a retailing tool and > all these brick-and-mortar companies will now become clicks and > bricks? > > "If that is the case," the analyst said, "all Amazon will have done is > to build market share for the day when its rivals catch up. If it > hasn't made money up to now, with its huge head start on the Internet, > how is it going to make big money when the others catch up? The cost > of switching from Amazon to another retailer is zero on the Internet. > > It's just one click. Wal-Mart hasn't even come into cyberspace in any > serious way yet -- and those guys are meaner than junk-yard dogs. You > think they're going to let Amazon just put them out of business? No > way." > > The second thing Amazon's future depends on, said this analyst, is > what inning we are in. > > If we are still in the first inning as far as Internet retailing is > concerned, maybe Amazon, or another Amazon soon to be born, will come > up with yet another innovation for using the Internet to sell things > at a profit. But if we are already in, say, the fifth inning, if the > basic Internet revolution in retailing is now in place and the rest is > just execution, then the Wal-Marts will eventually learn to execute. > Amazon might still be a winner -- it is a phenomenal marketer -- but > not a winner-take-all. > > The third unknown, the analyst said, is whether Amazon can use its > high stock price to buy one or more already profitable > brick-and-mortar retailer in order to go head to head with Wal-Mart. > At first people thought all business was moving to the Net; now they > see that the Net is moving into business. The next big merger wave > will be between virtual companies and real ones. > > "I swear, I thought Bezos' actual plan was to skip making a profit and > go directly from being an I.P.O. to being an N.G.O. for distributing > books cheaply," said another analyst. "I don't know what Amazon's > future is as a company -- but as a charity, wow! What a write-off > machine! It could have been called 'Unicef.com.' Really, who's given > away more kids' books at cost than Amazon? Bezos had a chance to be > Andrew Carnegie -- without ever making a dime. Now he's blown it by > making a profit and forcing everyone to look at Amazon like, well, a > real company. I mean, who needs that?" > > Copyright 1999 The New York Times Company > > > # distributed via <nettime>: no commercial use without permission > # <nettime> is a moderated mailing list for net criticism, > # collaborative text filtering and cultural politics of the nets > # more info: [EMAIL PROTECTED] and "info nettime-l" in the msg body > # archive: http://www.nettime.org contact: [EMAIL PROTECTED] >
