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Net Firms Running Out Of Cash?
mmccune writes, "Barrons is running an article about how many Internet based companies are about ready to run out of cash and are having trouble raising new cash. Their list includes many well know companies such as CDNow, Secure Computing, drkoop.com, Medscape, Infonautics, Intraware and Peapod.
Read more about it on
ZDNet. "
Amazon could be making a profit today if they wanted to, but they're still spending enourmous amounts on promotion. Folks keep sayting that some sort of bubble is going to burst, but that's not quite accurate.
I'm not so sure about this any more. The print and online editions of Fortune magazine have an interesting article on the questionable ethics and accounting practices of dot com companies. Practices that would be clearly seen as illegal or unseemly in tradition companies are par for the course at dot companies. These practices include the giving of pre-IPO shares to customers to garner favor and run up the stock price via the favorable contracts that will in turn be awarded, the quick cashing out of stock by certain CEOs (Jeff Bezos is an exception to this rule but look no further than the founder of eBay who's sold $187 million in shares or its CEO who's sold $50 million in less than a year), stocking of the executive board with so many company insiders there aren't enough outsiders to form SEC mandated audit committees and weird accounting practices.
Anyway back to Amazon, Fortune claims that upon investigation of the financial reports of certain dotcomms such as Amazon, eBay and 1-800-Flowers it was noticed that these firms tacked on several costs that had nothing to do with promotions into their marketing expense including shipping costs. This means that when Amazon claims that it isn't profitable yet due to the amount of money being spent on marketing they are fudging the truth because their books place certain permanent parts of their total cost structure as marketing expenses including shipping costs. Read the Fortune article it's really scary reading for anyone who has shares in a dotcomm because it makes you re-evaluate your thinking about the viability of the dot comm market.