Amazon's Bezos asks for forgiveness.
04/13/2001 4:28:42 PM MDT Albuquerque, Nm
By Dustin D. Brand; Owner AMO
Amazon's year was horrible, and their stock shows it.
The past year for the Internet's top retailer, Amazon.com, described from its illustrious founder and CEO: "Ouch.".
In a letter to shareholders filed with the U.S. Securities and Exchange Commission Friday -- a prologue to Amazon's annual report for the year ended Dec. 31, 2000 -- Amazon CEO Jeff Bezos mixed the typical financial facts with some serious groveling.
More importantly, the filing recognized what analysts have been shouting at the market for the past year: the mistakes that have shelled the company and its stock since it brought its online bookstore public in 1997. The mistakes included failed investments in a number of partner online retailers including Pets.com and Living.com, both of which went out of business last year. With the closure this week of online convenience store Kozmo.com, a company fueled in part by $60 million from Amazon, the pain of those investments have only become more apparent.
"We made these investments because we knew we wouldn't ourselves be entering these particular categories any time soon, and we believed passionately in the 'land rush' metaphor," Bezos wrote. "Indeed, that metaphor was an extraordinarily useful decision aid for several years starting in 1994, but we now believe its usefulness largely faded away."
"In retrospect, we significantly underestimated how much time would be available to enter these categories," he added.
Amazon is also seeing greater competition online from traditional retailers such as Wal-Mart (though their site keeps going down), which have invested more resources into their Internet sites in the past year. Amazon itself is acknowledging that the company's future market share is hard to predict. Bezos set a goal this year of reaching pro forma operating profit -- excluding charges related to debt, investments, and one-time items -- in the fourth quarter, but is not certain whether it will achieve that. "There can be no guarantees," he noted.
As for its summary of the year past, released Friday, there was nothing new. The company announced its annual earnings on Jan. 30, reporting sales of $2.76 billion, a 68 percent increase from 1999's $1.64 billion in sales. Gross profit surged 125 percent to $656 million in 2000 from $291 million a year earlier. Pro forma net losses, which grew to $417 million for the year, shrank to 11 percent of sales for the year, from 21 percent a year earlier.
While the last week has offered some positive gains for Amazon's (AMZN) stock, closing Thursday at $14.67 on four days of consecutive gains, its share price is down more than 80 percent from its high a year ago. And as the company's sales continue to grow, much of its positive news is still overshadowed by its $2.3 billion in accumulated debt and a harsh investing environment.
Also this week, Amazon told Wall Street it expects first-quarter results to be better than previously expected when it reports earnings on April 24. Net loss, less debt, and a number of one-time charges is expected by the company to be 22 cents per share on revenue of $695 million. Twenty-two analysts polled by First Call/Thomson Financial expected Amazon to report a loss of 30 cents per share on revenue of $669.6 million.
And finally, the company announced this week that it will team up with book selling giant Borders in a shared revenue partnership similar to its successful venture with Toysrus.com. Through the deal Amazon gains a grounded offline partner and 350 retail stores to advertise in.
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