Of all the companies to enter the public markets in the last 20 years, Amazon.com (AMZN 0.11%) has certainly been one of the most stunning successes. The company has grown to dominate e-commerce and disrupt several other industries, ranging from cloud storage to TV production. During that time, sales have grown to nearly $100 billion, and the stock is up 100-fold since its IPO days, making millionaires out of many early investors.
Much of Amazon's success is owed to its founder and CEO Jeff Bezos, who promised early on to focus on the long-term, ignoring conventional Wall Street metrics like quarterly profits, and has kept that promise over the years. Bezos's unconventional approach also extends to his attitude toward investors. Perhaps more than any other well-known CEO, Bezos keeps his shareholder base at arm's length. During the average year, he spends just six hours on investor relations, and rarely makes an appearance on earnings calls.
He justifies this approach as part of his long-term philosophy, saying that most investors aren't in it for the long-term and therefore aren't worth his time.
Growth is the magic number
Bezos's lack of communication isn't the only part of investor relations where the company comes up short. Amazon is also notorious for refusing to disclose key operating metrics, numbers that would give investors much greater insight in to the company's performance than they currently have.
Since it launched the Fire tablet in 2011, the retailer has routinely touted that the Fire its best-selling item, but without a benchmark that statement is essentially meaningless. On the contrary, rival Apple has no problem disclosing the sales of its individual products, and reports iPad sales each quarter. With Amazon, investors have no way to determine if tablet sales are 1 million or 10 million. Similarly, the company said Fire sales tripled on Black Friday, but with no hard number, the meaning of that statement is elusive.
Announcements about Prime membership are equally vexing. The company said that more than 10 million new members joined Prime over the holidays, but it's unclear how many of those were taking advantage of Amazon's free 30-day trial offer. Amazon has always been cagey about the number of Prime members it has, at best giving detail such as there were "at least 20 million members at the end of 2013. Netflix, the leader in video streaming, has no problem giving detail on its subscriber numbers. Its quarterly earnings numbers are always accompanied by subscriber data detailing domestic and international counts as well as additions.
Perhaps, Amazon fears that revealing this data will give competitors an advantage but divulging such information hasn't had any remarkable effect on Apple or Netflix.
In addition, Amazon's sales forecasts often come with a range so broad it renders them essentially useless. For the fourth quarter, management predicted revenue growth of 7%-18%. The state of the company, and the stock price, is much different at the bottom of that range than the top.
In Bezos, we trust
Bezos has repeatedly said that he manages Amazon as if it were a start-up, like it's still Day 1. The company's recent innovations and growth may still bear resemblance to a start-up, but start-ups tend to be small private companies without requirements to disclose information. Amazon, on the other had, is one of the biggest, most widely held companies in the world.
So far, Bezos's relatively lack of disclosure hasn't been a problem, but without profits, Amazon's stock price seems to be propped up by investor faith in the visionary leader. There are no earnings on which to base the share value, and we don't know key metrics like Prime membership or Kindle sales, which would help indicate how well some of the company's most important initiatives are doing.
Historically, Amazon stock has been a great bet, but it's now in its longest sustained down period since the tech bubble burst, off more than 25% from its all-time high just over a year ago. Competitive threats have increased, and losses have mounted. With its hands meddling in over a dozen different businesses, Bezos' big bet could either shoot the moon or sales could crumble, turning the stock sour. Unfortunately, for investors left in the dark, they probably won't know until it's too late.
