Silver lining to the tech-wreck. (Forward Observer).(financial success of Amazon.com Inc.)(Brief Article)

Almost since it went public nearly five years ago, the online retailer Amazon.com has been a poster child for Internet skeptics. How, they groused, could a new company selling books over the World Wide Web be worth more than Sears, Federated Department Stores, Saks, and Nordstrom combined? To the critics, Amazon was an absurd manifestation of the high-technology bubble.

In some ways, it was. Amazon sold its first public shares in May 1997 at $18 apiece. Two and a half years later, the stock had split three times, and the price had soared to $113. An investment of $1,800 became $135,600. Then within another two years, the share price had crashed to $5.50. The $1,800 nut was then worth a less stratospheric $6,600.

Amidst this rollercoaster ride, however, Amazon had strong fundamentals. It was built on a great idea, had excellent management, and good finances. Amazon's founder, Jeff Bezos, spent billions to develop a strong brand and excellent customer service. Now that strategy seems to be working. On January 22, Amazon announced it had just completed its first quarter in which revenues exceeded expenses.

Amazon's official earnings, after taxes and interest, were $5 million for the three months ending in December 2001. It lost $526 million for the year, but that compared with a $1.1 billion loss in 2000. The company finished 2001 with a cushion of $996 million in cash and marketable securities. With this news, Amazon stock jumped to about $14, indicating the market valued the company at $5 billion.

The triumph of Amazon comes at a time when Internet naysayers are crowing over what they see as the popping of the Internet bubble. New books like Dot.Con, by John Cassidy of The New Yorker, contend that the technology boom was a put-up job by stock promoters. That's nonsense. Technology tends to be overestimated when it is brand new and underestimated after the early excitement fades. Certainly, there was too much enthusiasm a few years ago, but there is too little today.

Look at eBay, the online auction house. When it went public in September 1998, two years after its founding, it was already profitable. In 2001, a recession year, sales rose 74 percent to $748 million, and profits roughly doubled to $90 million. Dell Computer, which sells ...