Amazon Makes a Profit

sofar writes: "Amazon finally makes a profit. Well, only $ 5mln, but maybe you can actually earn something on your stock now. At 1c a share it's no pension fund in Florida yet." I wonder how much of that profit represents 1-click licensing fees.

Not really a profit

[drb1001]

Yeah, but it was EBITA - earnings before interest, taxes, and amortization. In other words, they didn't count a bunch of stuff.

In their defense, they said they hoped to have positive EBITA -- their projection was not (yet) for real earnings.

Porn

[astrotek]

Meanwhile, porn sites have been making money since a text drawing of a tit was placed on usenet.

Re:Not really a profit

[hondo77]

No, it wasn't pro forma. It was a real net profit. Read the articles again. In fact, their pro forma profit was $35M.

A factory is a capital expenditure...

[MeowMeow Jones]

and not an expense.

Why? The factory is worth $10 billion dollars. Amazon could sell it if they had to. Then the factory depreciates over time and that's when the company can expense it.

I agree that this is a shitty return, but there's a big difference between spending $10 billion on a factory and $10 billion on programmers salaries.

Great, except that this company is in a defecit

[jamesmartinluther]

Yes, profits are always a good thing (when earned and honestly accounted for).

But the big "straight numbers" problem with Amazon can be illustrated as follows:

Quarter ending December 31, 2001
Total assets $ 1,637,547,000
- Total liabilities 3,077,547,000
= Total stockholders' deficit ($1,440,000,000)

Quarter ending Sep 30, 2001
Total Assets $1,346,368,000
- Total Liabilities $2,800,362,000
= Total Stockholder Equity ($1,453,994,000)

Would you pay $4.6B (about its current total market price) for a company that continues to be worth around $-1.4B? Take note that I am not accounting for "hope" and "prospects" here.

If they double, triple, or even quantuple this quarter's $5M take, it will be a long time before Amazon.com can justify the enormous chasm between debt and assets. Amazon.com must have some seriously bright prospects to justify their market cap!

The above fiancial data [yahoo.com] is based on SEC filings and is from the quarter ending Sep 30, 2001 and today's press release [yahoo.com] from Amazon.com.

Re:oh please

[Anonymous Coward]

No, they *did* post net income - please read the income statement. What do you think "generally accepted account principles" mean. Its GAAP - something that all companies use - standard measurement of accounting. It's real profit not funny money profit.

Jeez

Re:oh please

[Reality Master 101]

By "generally accepted accounting principles" they still lost $millions this quarter.

What was that you were saying about reading the press releases closely? "Amazon reported net income of $5 million, or a penny a share, under generally accepted accounting principles, well ahead of analysts' expectations."

Sheesh, dude, it's only the first line of the article. It says that analysts expected Amazon to report profit on a pro-forma basis, but they surprised everyone by using GAAP.

Re:This is interesting ...

[Anonymous Coward]

is Ebay profitable?

Yes, they had a profit of $90.4 million [etrade.com] last year.

do they take a certain % of each sale or something?

Yes, among other things [ebay.com]

But it's only Pro Forma!

[Boiner]

This is a Pro Forma profit, which is a nice (and legal) way of saying they've deviated from GAAP (Generally Accepted Accounting Principles) and done some creative accounting. CPA types will be glad to explain why there are several dozen ways to define $PROFIT.

Please, check the footnotes...

Re:Something to keep in mind

[boglebud]

The amount of securities debt Amazon is carrying is far more than the total value of the company.

The debt is accounted for in the "value" of the company's stock and, therefore, the value of the company. Remember, the debt raised is used to finance assets...it is not raised for nothing. It could be easily argued that the burden imposed on profitability by the amount of interest repayments made each year is more important than the nominal amount of debt on the balance sheet.

Now for the fun bit: when push comes to shove, bondholders get paid before stockholders

Erm...of course they do. Stockholder = owner. You are implying that a business owner may borrow money, and when things go wrong he should get the cost of his investment back before he repays external creditors. For example...I buy a store for $100 and borrow a further $100 from the bank to purchase inventory etc. Business is bad, inventory devalues, and my business fails. You think I should get my $100 back before the bank gets theirs? Obviously not.

the securities amazon.com has issued are trading at very low rates

The "rates" paid on bonds are, as someone else pointed out, related to the perceived risk in owning the bonds. If I were to choose to invest in a risky company, I would expect a higher rate of interest to compensate me for assuming a higher degree of risk. Alternatively, I could invest in a more financially stable company and get a smaller return.

The market thinks there's a good chance that Amazon will not be able to cover the interest payments on those bonds in the long term...This makes Amazon.com a risky buy

Risk is relative. Risk = uncertainty/volatility of financial return (amongst other definitions). And if the market as a whole thought that there was a realistic chance that Amazon couldn't service debt going forward, the company's stock would be worth basically nothing. There will be winners amongst the dot coms; Amazon is more than likely to be one of them.