. . . Give me your tired, your poor
Your huddled equities yearning to breath free,
The wretched refuse of your teeming markets.
Send these, the homeless, tempest-tossed, to me.
I lift my lamp beside the golden opening bell.
Our epigraph for today's column reads very similarly to Emma Lazarus's sonnet "The New Colossus," a portion of which is inscribed on the plinth of the Statue of Liberty. Those words above, or something very like them, have represented an inspirational beacon welcoming and warming those who for decades have traveled an ocean or two to immigrate into the United States. Today I invoke a rejiggered version of Emma Lazarus's words as a welcoming and warming beacon to those who have shared, along with us, the risk and pain of being an Amazon.com (Nasdaq: AMZN) shareholder through the "dot-com meltdown."
It is as true of this period of American business history as it is ANY chapter of business history: Many tried, and few will succeed. I continue to believe Amazon.com will be one of those who emerge from the "wretched refuse" of dot-com paper shares and create tangible value over the coming years.
This ain't DrKoop.com. This ain't Boo.com.
But this isn't your father's WalMart (NYSE: WMT), either.
Following Yahoo! (Nasdaq: YHOO), eBay (Nasdaq: EBAY), America Online (NYSE: AOL), and Amazon.com, a host of second-, third-, and eventually fourth-tier copycats threw up websites, raised money, blew it on advertising, and confirmed for us their third- or fourth-tier status by eventually scurrying back whence they came.
The process continues. What will be left are the sustainable enterprises that, ironically and not coincidentally, were for the most part the first-movers. The others (in Amazon's space that's eToys, CDNow, etc.) enjoyed a similar multiple to the top dogs for a while, but with a shift in the marketplace's demands -- now for probable profitability, rather than market share or "eyeballs" or "clicks" -- the tide receded quickly and left many in the sand. Though Amazon.com is down from $113 to below $32 as of this writing -- about a quarter of its high -- eToys as one example is down from $86 to $4 -- one twentieth of its high.
There was certainly too much venture capital for a while (which is a good problem to have, if you're going to have problems), and extremely low interest rates, which drove up the valuation of everything. Now that everything's down 50% or more, only a few true-blue entities maintain a market cap or heft that is at all worth noticing.
Heck, at least eToys still has a market cap of about half a billion. Many of its follow-on peers are but a fraction of that, if they're still in business.
Yes, for a long time there were many "huddled equities," arriving in boatloads across the good Ocean of Hope. They had heard the story of riches; they had already mapped the Seven Cities of Gold; they were prepared to take the risks necessary to enter this New World, this New Economy. Today, most are truly tired and poor, huddled, all yearning for someone to notice or validate them.
As I gazed at Amazon.com's third-quarter operating results, released late yesterday, I didn't really know what the market would make of them. We have watched what was a 20-bagger for this portfolio decline to -- as of yesterday's close -- a return of nine times our money in three years. It hasn't always been rational, in either direction. Hey, nine times your money in three years is nothing to sneeze at -- in fact, it's one of the best investments we've ever made. But given the risk we took to purchase Amazon, and given how much higher it has been in the past, these shares have certainly looked "homeless, tempest-tossed." What is now evident today is that Amazon.com's report of lower-than-expected losses and higher-than-expected revenues is a story that Wall Street needed to hear, wanted to hear.
That's evident because there were no leaks, as sometimes seems to accompany surprises, so we see a pristine view of the sentiment regarding the quarterly report. Amazon declined about a half point yesterday below $30, with the wraps clearly left on the announcement. Today, up some 8% as of this writing, it appears Amazon.com may have turned a corner. Not "The Corner." Amazon has many, many challenges before it still, primarily to demonstrate that it can actually profit from its redoubtable brand name and present base of 25 million e-commerce customers. But this is not and never has been a "made-in-the-shade" automatic moneymaker as an investment -- just as Amazon.com still has yet to make money.
But the story of a company that broke the rules, flew its large craft spectacularly high into the very riskiest thin air, and (this is the part yet unknown) managed to land the thing halfway around the globe later on and justify a market cap in the tens of billions (the market cap is $11 billion today) -- that story looks a little more believable this morning.
With The New Colossus, we lift our lamps.
(A good quick summary of Amazon's quarterly numbers comes from this posting by HowardRoark via our Amazon.com discussion board. Also, play along with me in Election Folly 2000, our TV companion game to who's going to win and, as important, how the networks will cover it. One last thing to check out this week: our upcoming Roadmap to Retirement Online Seminar. It's never too early to start!)
-- David Gardner, October 25, 2000