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A Milestone for $2 Billion in Debt Paid Off

Posted by: Rob Hof on February 24, 2009

When I wrote a cover story on in summer of 2000, Can Amazon Make It?, I was uncomfortable with the implication of the cover language that there was a good chance Amazon wouldn’t make it. Although Amazon clearly faced big challenges at the time, I didn’t think the implication that it could go out of business was warranted at the time based on what I knew about the company’s business model. And truth be told, I had some pitched conversations with some editors about that.

But there was reason for concern. Ravi Suria, a Lehman Brothers debt analyst (and how’d you like to have that title on your resume today?), got a lot of press insisting that Amazon faced imminent oblivion thanks to some $2 billion in debt. (Another question: Doesn’t $2 billion in debt sound quaintly trifling today?) He wrote in his report: “The company’s inability to make hard cash per unit sold is clearly manifested in its weak balance sheet, poor working-capital management, and massive negative operating cash flow—the financial characteristics that have driven innumerable retailers to disaster throughout history.”

Fast-forward to today, and things are a little different. In a little-noticed announcement, Amazon said it’s redeeming the last of that debt. This despite a terrible economy, especially for retail.

I have to think that founder and CEO Jeff Bezos must be letting loose one of his thunderous laughs today. After which, as is also his style, he will get back to business.

Reader Comments


February 27, 2009 10:42 PM

Need I say more than "Lehman Brothers debt analyst" for us to understand why their prediction was false. I put little faith in analysts then, and I put littler faith in analysts today. All too often analysts use the rear view mirror to predict what will (notice I didn't say "may") appear in the windshield.

Similar to how those at the Heritgage Foundation predicted there would be no recession January 2008, and the first stimulus package was "unnecessary", when high paid analysts get it wrong, they still get paid, and try to convince investors they have it "right" this time, to which I reply, "whatever".

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