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The Digital Skeptic: Why Amtrak Makes Sense After Amazon

NEW YORK ( TheStreet) -- After Jeff Bezos gets all the public relations mileage he can out of scooping up The Washington Post, he might want to consider buying yet another aging U.S. brand struggling for an identity in the digital age: Amtrak.

Because, let's be honest, here's a business Bezos should find pretty darn recognizable. Even the fastest whistle-stop tour through Amazon (AMZN - Get Report) and Amtrak's annual financial statements will reveal how both are nothing more than money-losing, taxpayer-subsidized transport networks stuck in the awful business of overpaying their engineers.

Size does not matter
From a financial analysis perspective, there is of course, a serious difference between Amazon and Amtrak that blinds many to the similarities between the country's largest online retailer and its largest overland passenger railroad: size.

Last year e-tail giant Amazon reported $61 billion in revenues, up an impressive 25% or so from the $48 billion it made in 2011. Amtrak, whose official name is the National Railroad Passenger Corp., reported just $2.9 billion in total revenues -- up about 6% from $2.7 billion in 2011.

But once past this contrast of scale, the posture, profits and troubling issues each face are eerily similar.

For starters, both companies have a freakishly similar, blithe approach to profits. There is Mr. Bezos' zillion-times-quoted line from a Harvard Business Review interview this year about how "Percentage margins are not one of the things we are seeking to optimize."

The two execs who run Amtrak, President and CEO Joseph H. Boardman and Chairman of the Board Thomas Carper, speak with a similarly blurry vision of making money in their annual letter to investors. "We generated enough revenue to cover 88% of our cash operating costs," they wrote.

Or said another way: "It's the absolute dollar-free cash flow per share that you want to maximize," Bezos said.

Profits?! We don't need no stinkin' profits
The investor boogie man looming here in the dark, of course, is that as much as these CEOs and the Wall Street sell-side analysts who back them like to pretend otherwise, these kinds of free-cash-flow analyses simply do not jibe with Generally Accepted Accounting Principles.

"'Free cash flow' does not have a uniform definition, and its title does not describe how it is calculated," read a Securities and Exchange Commission guidance release titled, not surprisingly, Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures.
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