All Boxed In

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If every online shopper bought as much stuff from Amazon.com as Jeff Bezos does, his company wouldn't be $2 billion in the hole. Heaps of UPS boxes line the floor of his cramped office in the PacMed Center, Amazon's Seattle headquarters. Bezos tears into them as if it's Christmas morning, relishing each moment of surprise. It's a stack of dvds! Kitchen baskets! Austin Powers dolls! More dvds! (Sample Bezos picks: Go, American Gigolo, Teaching Mrs. Tingle.) You get the sense he would be buying most of it even if he didn't run the company. This is one boss who really loves to unwrap things.

Which may help explain why Amazon itself acts like a hyperactive kid at the holidays — forever playing with something new. Bezos recently got into the automobile business through a joint venture with Greenlight.com. Customers can now order an Audi or a Chevy alongside electric drills and Oprah books.

Bezos doesn't stop at U.S. borders. Last week Amazon launched its French-language online store, Amazon.fr, a brave and expensive bid to raise international sales by entering a market where less than 1% of book sales are done online. It's an even bolder move considering the homegrown competition — online leader FNAC boasts a trusty offline brand name and Alapage.com is armed with the marketing prowess and deep pockets of its parent, France Telecom.

It hasn't been the best of times for TIME's 1999 Person of the Year. Except for one widely applauded joint operating deal with Toys "R" Us, such frantic unwrappings have not gone down well in an increasingly skeptical marketplace. Strong doubts are setting in over whether cybershoppers will ever turn to Amazon for big-ticket items. "Beyond books, music and videos, it's unclear whether they have a sustainable business," says Alan Alper, an analyst at e-commerce watchdog Gomez Advisors. Which raises a horrifying prospect for all e-tailing: Is the poster child for the new economy in danger of being dragged under?

The sudden collapse and bankruptcy of Living.com, which promised Amazon $145 million to be its home-furnishings partner over the next five years, haven't calmed investors' nerves (none of that cash ever made it to Amazon's coffers). Two weeks ago, it also emerged that Amazon has had to rearrange terms, less favorably, with other partners such as Drugstore.com.

The real worry is Amazon's debt load — which ballooned from $1.5 billion at the end of 1999 to $2.1 billion at the end of June — as the company continues to burn money. Amazon stock has nose-dived $50 since the year began, from about $89. Most employees' stock options are stuck below the price at which they were issued. "My mom calls me up and says, 'My God, David, is everything O.K.?'" says Amazon senior vice president David Risher, laughing.

That depends on whom you listen to. Amazon's financial viability — or lack of it — is one of the most hotly debated issues in the industry. At the PacMed Center, you would be hard pressed to find anyone who hasn't drunk deep of the Bezos Kool-Aid. The fact that their fearless leader dished out extra options to any recent hires whose stock is underwater hasn't hurt. But beyond mere cash incentives lies a genuine faith in the thoughts of Chairman Jeff.

The ruling rationale goes something like this: We always had to get big fast. Now we have to get even bigger even faster. The Internet landgrab isn't over just yet, especially overseas. Our infrastructure is scalable, so costs will drop as sales grow. The average customer is ordering more. Sales grew 84% in the second quarter. Most of our businesses are less than a year old. Only a quarter of revenues come from outside the U.S. Expect profitability in a few years, unless some other great investment opportunity comes along. Don't get it? Don't worry. "This is not a company to try to understand on the surface," says Bezos. "It requires focus, concentration."

At the other end of the spectrum stands Bezos' bκte noire, Ravi Suria, a debt analyst at Lehman Bros. in New York City. Suria shot to fame in June with a report that blew the stock to pieces. For the first time, a Wall Street institution proclaimed that Amazon would eventually run out of cash "unless it manages to pull another financing rabbit out of its rather magical hat." The day of reckoning will come in the first quarter of next year, when sales are slower and Amazon goes cap in hand for more cash, as it has in the past. In this more frugal climate, Suria suggests, Amazon's big capital sources will dry up.

Nonsense, says Bezos, who chides Suria for treating the company like a bricks-and-mortar retailer rather than a virtual store with a handful of distribution centers and minimal inventory costs. After Amazon's second-quarter results were released, Bezos claims, Suria tacitly admitted his mistake. "He sent us an e-mail starting out, 'Wow ... you guys are really tightening your belts,'" says Bezos. "I printed it and had it framed."

Suria's e-mail, however, was a mite more skeptical than Bezos makes out — definitely no "Wow" — and the analyst is just as bitingly critical of Amazon as before. "Nothing's changed," says Suria. "We still expect cash to be a problem in the first quarter. We still expect the party to be over."

This particular party has $908 million left in the bank. Its cash flow is at negative $400 million for the year — ugly, but Amazon doesn't expect to bleed much more. Its annual debt service is $150 million. No wonder the company is quietly shifting gears in the drive toward profitability. Eagle-eyed analysts have seen a slow, steady price rise on high-profit stuff like electronics. And the enormous premium that Greenlight.com is paying for placement on the site could be a sign of things to come, says Mike May, senior analyst at Jupiter Communications. "Increasingly, retailing is a Trojan horse for high-margin business like advertising," he notes.

Bezos has also been on a hiring spree this past year. He brought in new chief financial officer Warren Jenson, a veteran from General Electric, the most profitable firm in the Fortune 500, to impose old-school discipline on Amazon's more outlandish and expensive projects. And Diego Piacentini migrated from Apple Computer Europe to start a new push in international sales — a bet-the-farm strategy that aims for 40% of Amazon's revenue to come from international sales inside five years.

Whatever problems it faces elsewhere, Amazon has dominated the online book trade for so long that it has become etched into the landscape and the minds of online shoppers. The company is already the top online bookseller everywhere in the world except France and the Benelux countries. Even in markets where it doesn't have local operations, "Amazon has huge mindshare," says Abigail Leland, associate analyst at Forrester Research in Amsterdam. Heidi Fitzpatrick, Internet analyst at Lehman Bros. in London, points out that nobody's making money yet in the European online game. And Fitzpatrick is convinced that the company is "so far ahead of everyone else" that it's not Amazon but other European e-tailers that should be worried.

No one who knows Bezos seriously expects him to lead Amazon into oblivion. "We're in the midst of a flight to quality," says Joseph Galli, Amazon's former president, who quit suddenly and, he says, amicably earlier this year. "Companies that move to profitability will succeed. Jeff is very focused on profitability." Whether he can control his dvd-buying habits is another story altogether.

With reporting by Jeff Chu/London and Andrea Sachs/New York