Updated from 5:16 p.m. ET
SEATTLE -- Wall Street still isn't buying
take on things.
As its annual analyst day rolled on Tuesday, the company offered its
first bit of financial guidance beyond the fourth quarter, saying it hopes to be profitable for 2002 on a pro forma basis.
But analysts greeted the declaration with a collective cold shoulder, saying they need to see results before they believe Amazon's forecasts. Investors followed suit, pushing the stock down 3% on a broadly bullish day in the market as they wondered why they didn't get a big joint venture announcement or a more detailed financial forecast.
Going to the Well
In his opening comments, Warren Jenson, Amazon's chief financial officer, said, "we will be well positioned for pro forma operating profitability for the year 2002," excluding many costs such as amortization of goodwill and interest payments. In addition, he reiterated the company's plan to be profitable for the first time on a limited basis in the fourth quarter of 2001, although he hedged his comments by saying "there are no guarantees."
But with growth in the company's core books business -- its only profitable segment -- slowing in line with industry trends, some question whether the company can make its fourth quarter goal of at least breaking even.
"I'm a little disappointed we didn't hear more on the financial end," said Michael Legg, an analyst at
. "Jenson kind of breezed through it." On the profit talk for 2002, Legg said, "The fourth quarter is what I'm focused on. They have to get there before I can think of '02." (Legg has a hold rating on Amazon stock, and his firm hasn't had a banking relationship with the company.)
While some analysts had arrived in Seattle with a hunch the company would announce a new partnership with an established bricks-and-mortar retailer -- in the mold of its co-branded online toy store it operates with
-- or give revenue guidance for 2002 and beyond, the company did neither. In a question-and-answer session this morning, the company twice declined to say how much it expects revenue to grow over the next few years.
On any potential partnerships, the company said only that discussions are ongoing. "We are encouraged by the number and quality of the discussions going on," said Harrison Miller, Amazon's vice president and general manager of e-commerce services and the company's point man for negotiating such deals.
The PC Crowd
Perhaps the most substantive news was the company's announcement that it would begin selling personal computers in the second half of 2001. Yet executives said the sales would have little impact on its revenue for the remainder of the year.
"That makes you wonder," says Faye Landes, an analyst at
. "PCs are a very big ticket category." (Landes has an underperform rating and her firm does not have an investment banking business.)
In addition, the company also announced its intention of launching an institutional book store, so companies can place large book orders on credit. Amazon said it expects that business to grow to $100 million to $150 million in coming years.
"The reality is the we work we have done so far has focused on individuals with credit cards," David Risher, senior vice president of marketing and merchandising, told the gathering.
The Devil and the Details
Analysts say the meeting is not as well attended as in years past, as might be expected at a time when hype over the Internet is waning. But the company has offered more detailed information than it has in the past, answering
Wall Street's concerns that it was stingy with data on its finances. Indeed, much of the morning's presentations were filled with the minutiae of the company's business -- "retailing 101," as Landes described it.
"The emphasis is on the nuts-and-bolts," she said. "It is more substantive. I think they're trying to give more information. Which isn't to say they couldn't give us more."
That said, the nitty-gritty of the business has also been packaged with visionary rhetoric on the potential of the Internet alongside talk of the disadvantages of the "physical world," circa-1999 Internet-talk that some analysts scoffed at.
Considering the stock's plunge over recent months as Amazon's finances became a question mark, Legg and other analysts would be more comfortable with a little more visibility, as they say.
"It is still just a visionary outlook for the efficiencies of the Internet," Legg said. "There's still a long time away before profitability."