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Maven: Misreading Amazon's Earnings

Immediate reactions by traders too often shape story lines about the quality of the numbers.

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Any column concluding with a reference to an image of awkwardly mating camels as a metaphor for mergers must, of course, begin with this morning's goofy coverage of

Amazon's

(AMZN) - Get Amazon.com, Inc. Report

earnings.

If you ever need a reminder of why you should struggle against the temptation to read only one article on an earnings report, get a load of how the following are at odds with each other. That's what you get when the business media fail to be guided by how the numbers fit or contradict the company's long-term strategy. Instead, immediate, opportunistic reactions by traders too often shape story lines about the quality of the numbers.

USA Today

highlighted the fact that Amazon's net earnings plunged in its lead, then added that the fact that this still outpaced analysts' anemic estimates drove the stock up 14% in after-hours trading.

Revenue, too, it was soon added, beat expectations by a whisker, "consequently, Amazon shares shot up $4.72..."

USA Today

didn't bother to mention what was probably the biggest short-term positive and long-term negative of the day: that Amazon will (finally) slow its rate of investment in new products.

The Wall Street Journal

hit on this essential factor

in its subheadline and second sentence, giving it the credit it was due for the short-term movement of the stock price -- far more credit that their thimble-sized beats of expectations deserved.

We can set other articles against each other, but let's bypass them and the manic after-hours traders aside so that The Business Press Maven can leave you with the most essential factor concerning Amazon's long-term future: the steady long-term weakness in margins, as the company has to spend like drunken sailors to attract customers. Decent profits always seem to be a matter of

manana

TheStreet Recommends

,

manana

. Now they are finally saying less spending to pump the margins. But without the investment long term, can they still attract customers in such a competitive environment? Not.

IBM's

(IBM) - Get International Business Machines (IBM) Report

patent-infringement lawsuit against Amazon, reported prominently early Tuesday by

CNBC

, was all but forgotten in most reports this morning, lost in the glow of that after-hours activity. Kudos to

Barron's

blogger Tiernan Ray for at least asking the rhetorical question regarding the IBM suit --

does it matter

? It doesn't, but the Catch-22 they are in on the investment spending does.

With the business media swinging this way and that, thanks to a few after-hours traders, you can at least have a good laugh at the expense of what Enron skeev Jeffrey Skilling's lawyer just told

Business Week

, regarding

why his client is headed to the pokey

: "The media, the financial and popular press, have a tendency to line up on one side of an issue depending on where they see the public pulse."

Line up on one side of an issue? Double not. Trust The Business Press Maven: They line up on nine sides of every three-sided issue.

There aren't too many sides for the decent to be on when it comes to CEO behavior. This

Los Angeles Times

headline this morning says it all: "CEO gets retirement benefit without retiring." Retirements are now being front-dated. And

Wrigley

(WWY)

scion William Wrigley Jr. said he was not planning to retire, only to bring William Perez, an

S.C. Johnson

careerist (except for a brief train wreck as a

Nike

executive who got canned for kicking Phil Knight in the shins), to, he said repeatedly, spearhead new product initiatives.

Business Week

, like many others, focused more on

Perez's fallout with Nike

than the more important question: Does this man, who is not an entrepreneur but a stalwart at a consumer products company known for slow and steady products like Windex and Glade, know anything about an aggressive move into new products?

Care for some overstatement to go with your coffee? First, let's look at an example of standard good sense, from

CNNMoney.com

.

In talking about what will come this afternoon from the mouths of the

Federal Reserve

, they rightly write that investors are "widely expecting the central bank to leave rates unchanged," accurately adding that the real issue is in the language the Fed uses about future rates. Than along comes

The Associated Press

, which receives The Business Press Maven's first ever "Down Boy, Down Boy" award.

Said AP

, about the direction of rates in the lead: "U.S. Federal Reserve officials were

universally expected

(my italics) to decide on Wednesday..." Note to

AP

: Death is not universally expected on Wall Street.

Reader's Digest

has had trouble digesting profits. Losses last year came in at $117.4 million on $2.39 billion in sales. But

The Journal News

, its Westchester County, N.Y.-based hometown paper, highlights an emerging highlight:

Every Day With Rachael Ray

. The new magazine, based on the Food Network's cook-it-quick personality, is doing well and will be printing 1.7 million copies by August.

And from Clinton country, let's bound down to the Fluffidelphia Inquirer, which highlights

DuPont's

(DD) - Get DuPont de Nemours, Inc. Report

surprisingly good earnings

.

This earns The Business Press Maven's earnings season "Knock Me Over With a Sock" award, granted with all the usual fanfare to the earnings news that surprises me the most -- the one I never, ever, in a million, billion, years, saw coming. And rapture: DuPont's stock movement Tuesday is not mentioned until nearly halfway through the article.

As for rapture, a photograph of mating camels ranks as the raciest cover in the history of

The Economist

. The article it's for holds a lasting lesson about the challenges of mergers. The cover was included in a magazine industry list of the

top covers ever

. Scroll down and behold.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.