Creditor squeeze? What creditor squeeze?

Although investors should be "on alert" for potential liquidity problems at e-tail giant

Amazon.com

(AMZN) - Get Report

, the company's balance sheet is in solid shape,

Merrill Lynch

analyst Henry Blodget said in a report published Monday.

Blodget's report on Amazon's balance sheet takes a more moderate view of the company's cash position than a recent

Lehman Brothers

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analysis that

predicted the company is likely to face a "creditor squeeze" by the second half of 2001 as vendors demand tighter payment terms.

"After re-analyzing Amazon's cash and liquidity, we remain comfortable with it," wrote Blodget.

Amazon shares were up nearly 10%, or $1.31, at $14.69.

The health of Amazon's balance sheet has come under scrutiny in recent days, following a statement by the company that said it expects to turn an operating profit by the end of 2001, even as it slashed its revenue forecasts for the year.

Most analysts expect the company to be able to pay its bills as it drives toward profitability -- it had about $1.1 billion in cash and marketable securities at the end of the fourth quarter -- but Lehman Brothers analyst Ravi Suria has continually been a thorn in the company's side. For the third time in less than a year Suria, a debt analyst, advised investors to stay away from Amazon convertible bonds. In doing so, Suria focused on the company's working capital -- or current assets minus liabilities -- as the proper metric to judge how solid its balance sheet is. Suria found this figure to be much less than the cash and marketable securities figure highlighted by the company.

Suria predicted that working capital could fall below zero, and force a creditor squeeze.

Blodget, however, thinks otherwise.

"In Amazon's case, we believe that working capital is not the best measure of near-term liquidity -- cash is," wrote Blodget. "We continue to believe that the major issue for Amazon's stock is decelerating revenue growth, not cash and/or liquidity."