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says its book business is profitable.

Oh, yeah?

The company's fourth-quarter earnings release was beautifully choreographed, fabulously danced and wonderfully received. (At least so it seemed based on the 21% rise in Amazon's stock Thursday.) "They said what the Street wanted to hear," reasoned


analyst Sara Farley, in a report that reiterated her neutral rating on the stock.

And what the Street wanted to hear was the word profit.

Just one question: How does Amazon define profit? Jim Chanos of

Kynikos Associates

in New York, one of the country's largest short-selling funds, did the math and came away with a


for the book business -- not a profit. (Chanos' fund is short Amazon.) He got there by subtracting his estimates of cost of sales and Amazon's fulfillment costs. He then deducted estimated marketing and sales expenses as well as general and administrative expenses.

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When Chanos ran his calculation (along with his estimates) by analysts who are friendly to Amazon, each gave him slightly different numbers on the cost of sales, fulfillment costs and marketing and sales costs -- differences that didn't really affect his bottom line:


general and administrative costs, Amazon still didn't make any money.

"But," the analysts argue (and I'm extrapolating here, based on what Chanos told me), "Amazon is telling us their definition of profit is


general and administrative costs." (The analysts are calling it "contributed profit." Contributed profit? That's a new one!)

General and administrative costs are considered normal expenses for every business, which is why Chanos included them. "I guess we have a philosophical difference," Chanos says. He adds: "I think the company is being misleading, at best, saying books are profitable, because using my numbers they're only profitable on a gross-profit basis." (By gross profit Chanos means profitable before sales and marketing as well as general and administrative costs.)

But that's only one reason Chanos and others are questioning the quality of the story being spun by Amazon. (Go see my buddy

Joey Bousquin's

analysis on's

news pages for yet another take on the company's numbers.)

Not only is the company running low on cash, but despite writing off $39 million in inventory, the amount of inventory on hand still rose by around $100 million from the third quarter. (Shouldn't that have been going down?) And payables, the amount owed to suppliers, leaped by 95% from the third quarter. (Stretching out payables is one way to conserve cash. Usually, for a retailer, payables rise in the third quarter, as inventories are bought for Christmas, then fall during the fourth quarter.)

But wait -- there's more: Click here for the conclusion of today's column.

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.