When money-losing Amazon.com offered a 30% discount on books over $30 last fall and later added a free-shipping offer on orders over $99, some analysts thought the notoriously expansive CEO Jeffrey Bezos was going off the deep end yet again. Apparently not: The online retailer on Apr. 23 reported a surprise first-quarter operating profit, convincing even skeptics that it's finally turning the corner. The news boosted shares 19%, to $16.79.
Although Amazon (AMZN) posted a net loss of $23 million for the quarter--and is not expected to report a net profit for the full year--it posted an unexpected operating profit of $2 million. Sales rose 21%, to $847 million. The big reason, says U.S. Bancorp Piper Jaffray analyst Safa Rashtchy, is lots of customers bought more to get free shipping, reducing Amazon's cost per order. Bezos says he has no plans to let up: He just extended the 30% discount to books over $15. "This is something we think we can do for years," says Bezos. Now if he can only say the same thing about earnings. EMC (EMC) will introduce a storage system on Apr. 29 that could open up a multibillion-dollar market for the data-storage leader. Called Centera, the system is a hardware-software combo that offers a cheap but smart way for companies to create digital archives for photos, e-mail, or other documents they need to keep. Tech analysts call Centera a breakthrough because the system would be able to find and retrieve files within seconds. Tape--the current alternative--can take days. EMC has signed up two dozen independent software companies to help sell Centera and link it to customers' servers. New York Attorney General Eliot Spitzer looked like a lone crusader when he accused Merrill Lynch in early April of deceiving the public by publishing overly rosy research reports. Now he has lots of company. On Apr. 24, the Securities & Exchange Commission's Enforcement Div. launched a probe of analysts' conflicts, according to SEC sources. The commission is joining the Justice Dept.'s Criminal Div. and a task force of state securities regulators in asking whether Wall Street analysts misled investors during the go-go 1990s. Spitzer says that the practice of analysts recommending stocks in order to bring in investment-banking business is "corrupt; it may be criminal." All this tough talk has prompted Wall Street to bring in the big guns: Merrill Lynch has hired former New York Mayor Rudolph Giuliani--a onetime federal prosecutor--as an adviser. Evidence is mounting that Nasdaq is poised to make a friendly bid for the London Stock Exchange. Representatives from both of the markets decline to confirm that talks are at an advanced stage. But a London investment banker who is advising on the deal says he would be surprised if "something doesn't happen soon."
Combining the 31-year-old Nasdaq with the 229-year-old LSE would create the world's biggest stock exchange, based on the market capitalization of traded companies. The merger would also give Nasdaq a significant transatlantic presence and buttress the LSE in the face of intensifying competition from Paris-based Euronext and Frankfurt's Deutsche Borse. That's why the Continental exchanges aren't expected to let a Nasdaq-LSE combination go ahead without a challenge. On Apr. 23, Exxon Mobil (XOM) said first-quarter earnings fell 58% as oil and natural-gas prices plunged, and the refining industry had its worst profit slump since the 1980s. Net income fell to $2.09 billion while revenue dropped 24%, to $43.5 billion. Marathon Oil reported an 87% decline in first-quarter net income, to $67 million, on a 26% drop in revenue, to $6.45 billion. It looks like Exxon and Marathon won't be alone. Analyst Matthew Warburton of UBS Warburg estimates 2002 first-quarter net income for major U.S. integrated oil companies will fall 63%. After months of trying to come up with a restructuring plan that would not include a trip through bankruptcy court, Williams Communications Group filed for Chapter 11 on Apr. 22. The move came just one day shy of the one-year anniversary of the telecom's spin-off from Williams Cos., a Tulsa-based energy concern. Williams Communications' stock, which once commanded as much as $60 a share, closed Apr. 23 at 6 cents. It filed after reaching pacts that call for its bondholders and Williams Cos. to receive all the reorganized company's equity. -- Patrick Stokes will become Anheuser-Busch's (BUD) CEO, succeeding August Busch III, who will continue as chairman.
-- Celera Genomics (CRA) named Kathy Ordo?ez president, succeeding J.Craig Venter.
-- AT&T (T) reported a quarterly net loss of $975 million. Blockbuster (BBI) shares jumped 9.96% on Apr. 24, to $26.95, after the chain beat Wall Street's expectations for the first quarter. Buoyed by strong video game and DVD rentals, Blockbuster posted a 42% profit gain before a massive accounting charge resulted in a $1.75 billion net loss. The company expects 2002 profits to be slightly above Wall Street's estimate.