The controversial report on Amazon.com (AMZN:Nasdaq - news - boards) released today by Lehman Brothers analyst Ravi Suria is worth noting less for its negative conclusions about the money-losing and debt-laden retailer than for its larger message about the sad state of security analysis on Wall Street today.

This is not in any way meant as a knock against Suria. He is an excellent analyst -- last year voted one of Lehman's best in an internal straw poll. And in the past year, his negative calls on Amazon have been far more prescient, and thus profitable for investors, than those by the likes of Morgan Stanley Dean Witter's Mary Meeker or Merrill Lynch's Henry Blodget.

No, Suria's report is notable for what it says about other sell-side analysts who should be writing more skeptical reports about the companies they follow but don't.

The language in Suria's 34-page report is often dry as dust. The analysis may turn out to be right, wrong or somewhere in between. But the quality that makes Suria's report notable is its independence of mind. And that is precisely what any investor, bull or bear, should want from an analyst -- a report that takes a new analytical cut and forces you to think about what your own and why.

Love Those Buy- Rated Stocks It's been a tough year for Amazon.com

There is nothing in Suria's report that is especially complex. (You might also want to take a look at his solid work on telco service companies. ) Suria simply connects the financial dots and raises obvious, if generally avoided, questions.

First, he explains why he is concerned about the company's liquidity. "This is primarily because, despite the higher reported numbers on the 'cash and marketable' securities item line, the current liabilities for the company have grown much faster than the current assets, clearly leaving Amazon with a much-depleted liquidity position as it enters the new year," he writes.

Second, he looks at Amazon's net working capital -- current assets minus current liabilities -- a critical financial measure to gauge a company's ability to survive a difficult patch. He notes in his report that Amazon's net working capital has "been steadily declining" and "without additional capital infusion, the working capital" will go negative this year.

Then he comes to the most controversial part of the report. He calls into question Amazon's ability to survive a depletion of its working capital. He expects "a creditor squeeze in the second half of the year" caused by vendors worried about getting paid by Amazon. If that came to pass, it could spell doom for common stockholders and lead to a painful restructuring of the company.

Why, you might ask, is Suria so hard on Amazon? Is he just a sour guy? Does he have something against Amazon? Does Lehman? (Unlikely, given that Lehman has underwritten Amazon securities in recent years.)

The more reasonable answer is that Suria is a convertible debt analyst. Debt guys always examine a company's balance sheet, not just its income statement. Debt analysts look at a company with the gimlet eye of creditors who cannot afford to risk permanent loss of capital because the potential upside on a debt security, even convertible debt, is more limited than the possible gain on common stock. When Amazon issued its convertible debt in 1999 and 2000, it was sold as a kind of equity instrument with a midteens yield-to-maturity.

Another reason Suria can get away with writing negatively may be that in the convertible and junk bond markets, investors are not generally bothered by the free exchange of opinions. These are mainly professional markets. Participants are not shocked by overpriced securities being attacked. In contrast, the market for Amazon stock is significantly made up of retail investors. Retail is often more credulous than the pros. So, bearish equity analysts often must contend with the outrage of disappointed investors who tend to blame the messenger for the message.

The outrage of aggrieved retail investors is nothing compared with the vitriol directed at a skeptical stock analyst by publicly traded companies. Even if a firm such as Lehman were not angling for underwriting business from a company like Amazon, the investment bank would not want to get a reputation for bearishness. Other potential investment banking clients might be put off. Lehman may no longer be a bulge bracket firm like Merrill or Morgan Stanley, but it tries to get as much investment banking business as it can. So, you have to tip your hat to Lehman for allowing Suria's report to see the light of day.

Not Your Everyday Report

In contrast, last week after Amazon reported disappointing earnings and revenue, Morgan Stanley's Meeker reiterated her outperform rating on the stock and once again called the bottom in the stock. The same day, Merrill's Blodget weighed in with a similarly "hard-hitting" reaffirmation of his accumulate/buy rating on the stock because, "we believe [the] worst is over." Since then, Amazon's stock price has fallen another 20%. But you probably guessed that.

A Laugh Riot

Even if Suria is wrong, the potential amount of money to be lost by following Suria's recommendation to stay away can never approach the billions of dollars of investor capital lost at the urgings of Meeker and Blodget. (Amazon stock is down 85% from its high.) Suria is simply stating the obvious: Amazon is a leveraged company that may never become as big or profitable as some had hoped. The real Wall Street scandal is that investors see so few reports like Suria's.

The more typical fare comes from folks like Salomon Smith Barney analyst Tim Albright. He put out a report this week called, "Amazon.com: Trading Growth for Profits in 2001." Albright has an outperform rating on Amazon and in the report described Amazon's balance sheet as "secure." Albright predicts the company would reach its goal of operational profitability by the fourth quarter without the need for additional capital. (Salomon is not one of Amazon's bankers.)