Jim Cramer

's recent

dispatch on the "Bull Case for

Amazon

"

(AMZN) - Get Report

assumes the company will win because it will be the last e-company standing. And as the last company standing, it raises prices, and so much for the gross-margin issue I raised

last night. Or so it would seem.

But that assumes that consumers will sit idly by and accept high prices, and that the failure of others won't create new competitors (a la the airline industry), and that assumes that

Wal-Mart

(WMT) - Get Report

,

Barnes & Noble

(BKS) - Get Report

and other well-capitalized brick-and-clickers won't make it. (Check out my recent

Fortune

article on how the brick-and-clickers are doing much better than most folks realize.)

The last-man-standing defense, as Cramer calls it, is just another way to justify a high multiple for a company that isn't yet making any money and, despite what the company says, shows little promise of making money anytime soon.

While Wall Street was busy looking at the company's booming revenues and its narrower-than-expected loss, some analysts were looking at other, less obvious details, which raise serious questions about whether Amazon can ever make much money regardless of whether it's the last man standing.

For example, the year-over-year revenue growth in Amazon's core U.S. biz -- books, music and DVD/video -- was just 50% in the first quarter, down from 98% the quarter before. "That's staggering," says longtime Amazon bear Jeff Matthews of

Ram Partners

in Connecticut. "If the Gap Stores division of

Gap

(GPS) - Get Report

or the core division of any high-growth retailer reported that its sales growth had dropped in half," Matthews adds, "it would be, 'Game over, let me out of here.'"

Then there's the issue of gross margins, which I mentioned in last night's column on Amazon. If you include fulfillment (the cost of filling orders) and exclude revenues from companies in which it has an investment, gross margins are really more like a paltry 1% or 2%, rather than the 22.3% that Amazon reported.

Fulfillment, the big-ticket item, accounts for a whopping 17 percentage points of those margins. Amazon and other Internet companies may be forced by changes in accounting rules to include their fulfillment costs as "cost of goods sold" -- a key component of gross margin -- rather than as normal operating expenses. (Gross margin is calculated by subtracting cost of goods from revenues and dividing the remainder, or gross profit, by revenues.)

That prompted one reader to wonder what the difference was, because either way, the fulfillment costs take their toll on earnings. Good point: From a bottom-line, profit standpoint, it doesn't really matter whether those fulfillment costs are included as a cost of goods or as a regular expense. The results are the same: They all go into the same pool and, in the end, the company either swims (turning a profit) or it doesn't.

What does matter, though, is the psychological impact of a company that has been touting its rising gross margins -- which it says are 22.3% -- now having to say that it has a gross margin of 1% or 2%. A concept stock with a 1% or 2% gross margin, even if you're merely juggling where an item appears on the income statement, simply ain't the same as one with a 22.3% margin!

That's not all. The issue of whether to include revenues from affiliates as revenues for Amazon is a crucial one -- at least from the standpoint of short-sellers. As this column pointed out a few months ago, that's one reason short-sellers are

comparing Amazon with

Boston Chicken

(BOSTQ)

, which included revenues, but not losses, from its franchisees.

Remember, Amazon is an investor in those companies, and it included $19 million in advertising revenues from them last quarter. It then pretty much told Wall Street to ignore $88 million in its share of losses from those same companies. That's up considerably from the $60 million some analysts had been expecting, but the size of the losses was viewed as a nonevent on Wall Street because Amazon was focusing on results

without

those losses and several other items.

"What Amazon is telling people is, 'Lets look at the loss from operations, which includes the good stuff, but let's exclude the bad stuff,' " says one short-seller.

"For an apples-to-apples comparison," adds another, "they should put the fee payments below the line, too."

Or they should steer analysts to include the losses as part of income. But doing so would've added 26 cents per share to the company's loss. And besides, bullish analysts claim Amazon is accounting for the losses the right way because the revenues in question are merely advertising fees -- not a share of operating revenues.

According to short-sellers, however, when those companies pay to advertise on Amazon, they increase the size of their own losses. As their losses go up, so does Amazon's proportionate share of those losses, based on its investment in those companies. (Tricky, I know, but the short-sellers are adamant about this issue.)

Just as important, however, is whether those revenues are sustainable. "Investors should not be overlooking the risk Amazon has by taking stakes in all of these companies," says

PaineWebber

analyst Sara Farley, who has a neutral rating on the stock. When Amazon closed on its investment in

Ashford.com

(ASFD)

in January, for example, Ashford was an $11 stock; now it's $3. "What's the likelihood that future cash payments from Ashford will be made?" Matthews asks.

In the end, stock investors may not care about any of this, but bond investors -- who have first claim on the company's assets -- do. Amazon's $2 billion in bonds, which have been a longtime thorn in the company's side, currently yield around 12.5% and trade at around 62 cents on the dollar, suggesting that bondholders remain concerned about Amazon's viability. "That's the same yield we're paying Colombia," cracks one short-seller. "And they're sufficiently concerned that they're paying twice the rate of Treasuries for first claim on the assets."

That's because the bond investors are playing the last-man-standing defense, too. Only the last one left standing, they worry, will be them!

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

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.