Speculation Rife Over Amazon's Cash Position

"Our business is fundamentally simple," Jenson said at the Goldman Sachs technology conference. "As units served increase, our unit costs go down, margins increase and cash flow increases."

Questions Raised

Jenson spoke at the conference on Monday, hours after Amazon stock posted a loss. Earlier, however, media sources had raised questions about the e-tailer's cash position, noting that some Amazon securities had been used as collateral for property leases and other debt.

Critics noted that the arrangement, while not unusual, probably means that Amazon has less cash on hand than investors believe. It also seems to dovetail with widespread investor concerns about corporate accounting practices, aroused by the collapse of energy giant Enron.

Amazon shares have slumped since the company's first-ever quarterly profit propelled its share price to $15.50 in late January. The e-tailer's stock price fell to $12.53 on Monday and was down to $11.79 in early trading Tuesday.

Analysts Unfazed

But Goldman Sachs analyst Anthony Noto said he is confident that Amazon has reached a turning point in its history.

"The fourth quarter showed that Amazon is moving to becoming a company that can drive significant cash flow going forward," Noto said at the conference.

Noto also sought to downplay accounting concerns, noting that Amazon filed its annual report with the U.S. Securities and Exchange Commission just two days after releasing its quarterly report. He added that the filing came in "record time."

Morningstar.com stock analyst David Kathman said he agrees that cash concerns have been overblown.

Kathman noted that Amazon first faced serious questions about its cash reserves in summer 2000, when Lehman Brothers analyst Ravi Suria floated the notion that Amazon could run out of cash before the end of 2001.

"Amazon's cash position is not a huge concern for me, though of course it's something I'm always keeping an eye on," Kathman told the E-Commerce Times. When Suria raised questions, "I said they would get through that mini-crisis, and they did. Now they're in a significantly stronger position than they were back then in terms of cash flow."

Reasons To Smile

Jenson, meanwhile, told analysts and investors to focus on several key factors that will drive growth and cash flow at Amazon. Over the course of the past two years, he said, Amazon has expanded its revenue stream at a rapid pace.

In addition to traditional e-tail sales , Amazon now gains from its used marketplace; from sales made by its technology partners; through sales by such retailers as Toysrus.com, which are featured on its own pages; and through sales by retailers whose Web sites Amazon operates, as it plans to do with Target.com later this year.

"In two years, we've gone from one retail revenue source to four," Jenson said.

Jenson said several factors will help Amazon continue to grow and remain profitable, including its still-expanding selection, an improved customer experience -- he cited a 30 percent drop in customer service calls during the fourth quarter -- lower prices and globalization.