NEW YORK ( TheStreet) --If you listen to the rhetoric from Amazon.com (AMZN - Get Report) bears, you would think the company's CEO, Jeff Bezos, is little more than a bumbling idiot who oversees a fledgling e-commerce firm on the verge of extinction.
Even a person I deeply respect, fellow TheStreet contributor Robert Weinstein, exhibits a gross misunderstanding of what Amazon is about and why, even though by traditional quantitative measures AMZN is overvalued, it simply does not matter.
In his article Amazon: No Such Thing as Free Shipping, Weinstein says things such as:
Investments are based on numbers. At the end of the day the only thing that goes into a bank account is profits. Without profits, there is nothing. Amazon doesn't have any profits, and there is little to demonstrate the situation will change any time soon.... Amazon is no different from the local shopping mall. There are a host of stores within the Amazon shopping experience all tied together by an Ethernet cable connecting to Amazon's payment system. As physical delivery of content moves to digital delivery, Amazon will lose another competitive advantage; its superior logistics ability. Anyone can sell an online e-book, and the ability to margin a commodity item like an ordinary digital download will not be easy. Weinstein also throws in pieces of the standard valuation argument, trotted out by AMZN bear after AMZN bear. He chides Jeff Bezos' more-than-decade-long strategy of sacrificing the short term in order to maximize massive long-term opportunity. I'm staying at Weinstein's home this fall in the backwoods of Wisconsin. The closest big city is Minneapolis-St. Paul. I might have to take him there to expose him to the air the civilized world breathes. Robert and I are actually great friends; therefore, I can say these things to him and about him without restraint. But, in all seriousness, it bewilders me when otherwise incredibly intelligent people make this type of argument against Bezos and Amazon. Farhad Manjoo wrote an article for Slate the other day I wish I had written. In it, Manjoo contends that Amazon decided to cave in and cut sales-tax deals in states across the country for reasons that will ultimately benefit the company. Pulling from an investigative report the Financial Times published on Amazon, Manjoo explains how and why this is the case. He points out that, up until now, Amazon located distribution warehouses in tax-friendly states. From these bases, Amazon delivers product to customers across the nation, including major urban markets such as New York, Los Angeles and San Francisco. That's all changing. Manjoo runs down Amazon's extensive program of building distribution centers: One in New Jersey not far from New York City. Two near San Francisco and Los Angeles with tentative plans to open up to 10 more in California. That's hundreds of millions of dollars' worth of spending (and loads of jobs) in addition to the $200 million it spent in Texas, $150 million in Indiana, $150 million in Tennessee and $135 million in Virginia, just to name a few.
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