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July 5, 2000

Market Data as of 7/5/00, 12:25 PM ET:

o Dow Jones Industrial Average: 10,566.68 up 6.01, 0.06%

o Nasdaq Composite Index: 3,924.08 down 67.85, -1.70%

o S&P 500: 1,460.77 down 8.55, -0.58%

o TSC Internet: 836.41 down 10.61, -1.25%

o Russell 2000: 520.76 down 3.28, -0.63%

o 30-Year Treasury: 105 20/32 up 12/32, yield 5.851%

In Today's Bulletin:

o Herb on TheStreet: Why Amazon Is No Longer a Growth Stock
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Herb on TheStreet: Why Amazon Is No Longer a Growth Stock


Herb Greenberg

Senior Columnist

7/5/00 6:31 AM ET

Merrill Lynch analyst Henry Blodget's defense of (AMZN) - Get, Inc. Report last week, comparing it with America Online (AOL) in earlier years, was the last straw for Jeff Matthews of Ram Partners, who is short Amazon. Jeff has been quoted here numerous times pointing out what he thinks are the flaws in Amazon's biz model. You don't even want to know what he thought of the three-part series last week with Legg Mason analyst Randy Befumo's rationale for why several Legg Mason funds have been fond of Amazon. I ran those to show the other side of the story after Amazon shorts had added their thoughts to a critical report on Amazon by a Lehman Brothers convertible-bond analyst. Then came Amazon's defense of itself. (The company called the criticism hogwash.) Then came Blodget, who ironically got the critical ball rolling by pointing out that Amazon's sequential sales this quarter may be flat. Now, once again, here's Matthews:

I'm jealous.


jealous. Try as I might, I can't get any of my companies -- whose stocks I own -- to copy the latest PR tactic being used by those clever folks at to bull their stock. "We're an e-tailer," they used to stress, when e-tailing was The Next Big Thing. "We're doing auctions," they insisted, when


(EBAY) - Get eBay Inc. Report

was hot.

"We're really an incubator," Jeff Bezos declared in early March, just about the day


craze peaked. "We're the last one standing," they proudly boasted a few short weeks ago in the carnage of dot-com investing.

So, now what are they saying? "We're not going bankrupt!" is the company's slogan of the week ... and believe it or not, it's working. The stock is up 4 points -- about a billion dollars in market value -- since last Friday's drubbing when Mary Meeker whispered of revenue weakness, and the infamous Lehman credit report simultaneously exposed the company for the highly leveraged, shareholder-lawsuit-in-waiting that it is.

As I said, I'm jealous. I wish the folks at

Palm Inc



, which I have been buying for a few weeks now, would have used it on their recent conference call. (As it was, Palm's blowout revenue did the job.) And I have plenty of other stocks that could use an extra billion in market cap by saying they


running out of cash this year.

Now, it is true that Amazon can factually say, "I'm not dead yet," like the old man in

Monty Python and the Holy Grail

. But the poor, beleaguered retailer is certainly no, as we knew it, any more.

Nine months ago, when I pointed out (

in this column ) the deteriorating fundamentals of their business (which I had once thought would make

Barnes & Noble

(BKS) - Get Barnes & Noble, Inc. Report

obsolete), it seemed absurd to a vast majority of readers, but now it is demonstrably true that the online model has fallen and it can't get up.

Look no further than revenue growth, which has always been the crux of the story. Analysts are so busy cutting 2Q revenue estimates for Amazon that they haven't noticed the company is actually underperforming just about every retailer in my Value Line. Even



, lowly Kmart, a store my dog wouldn't shop in, will see a seasonal uptick that beats Amazon by a mile this quarter.

You see how Amazon has hit the wall? Is that clear enough? Kmart is outperforming Amazon this quarter! And if you want to get really depressed, compare this slide into oblivion with a good retailer, like


(WMT) - Get Walmart Inc. Report

. Wal-Mart will do $47 billion of business

this quarter alone

, and it'll still grow faster than Amazon, which at $585 million or so is trying to blame "the law of large numbers" for the slowdown. While Amazon ain't dead yet, the model certainly is.

And just for the record, I wouldn't advise making the mistake Blodget made Thursday when he tried really hard to make an upbeat comparison of Amazon with the AOL of 1996, when AOL hit a rough patch of its own, as a way of justifying sticking with Amazon's stock. Take a gander at the difference in the fundamental picture.

The party's over. You want growth? Buy Palm. Its revenue grew 29% sequentially, and beat the Street estimates by 25% Year/year revenue-growth numbers were raised by Wall Street analysts from 50% to 100%. And, best of all, it's not going bankrupt!

Herb Greenberg writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

Copyright 2000, Inc. All rights reserved.