In sports, the superstars always seem to get the good press, while the solid utility players rarely get noticed.
That is, until they make an error.
Now, given the response this week of Wall Street analysts and investors to Amazon.com and eBay’s quarterly reports, I’m beginning to think that the same double standard applies to the e-commerce arena.
After all, an adoring press touted Amazon.com as a winner because its revenue beat analysts’ estimates — even though the company reported a loss of $197 million (US$), or 49 cents per share.
On the other hand, eBay’s report was panned by the media with such lackluster phrases as: “It beat earning expectations, but investors are worried about its costs.”
Another Profitable Quarter
If you didn’t read eBay’s quarterly report, you would have sworn the company had lost more money than Amazon — when it actually earned $1.4 million, or 1 cent per share.
Additionally, eBay earned $461,000 during the previous quarter, giving the company back-to-back profits.
Nonetheless, by the end of trading on Wednesday, eBay’s stock slipped more than $13 per share and lost more than 9 percent of its value. At the same time, Amazon.com shares lost $5.31 per share, or about 7 percent of its value.
Judged By Other Factors
Based solely on the two companies’ latest quarterly reports, I asked myself why Amazon.com is being treated with kid gloves while eBay is getting sucker punched and kicked in the ribs.
I’ve come to the conclusion that this disconnect has to do with several factors that have nothing to do with eBay’s performance over the last two quarters.
Separately, these events don’t appear that significant, but together they pack a potentially powerful punch against the number one online auctioneer.
First, German media titan Bertelsmann AG staked a claim to the burgeoning European online trading market with the August launch of its own Internet auction site.
The new site, known as Andsold, is operated through a partnership with its Gruner + Jahr and Bertelsmann Multimedia units. At the time, the move seemed to be in direct response to eBay, Inc.’s June purchase of a German online trading company.
Then in September, Woburn, Massachusetts-based FairMarket, Inc. teamed up with Microsoft, Dell, [email protected] and other e-commerce portals to stage an all-out attack against eBay.
The mighty alliance administered by FairMarket operates a network of more than 100 auction Web sites. This arrangement means that an antique for sale on Microsoft will automatically be posted on Lycos and Excite as well.
The company already operates an auction network for Lycos, Dell and CompUSA.
And Then There Were Outages
Most significantly, eBay experienced some memorable outages this year, including a 22-hour shutdown in June.
However, since that time, the company has taken strong measures to make sure such a debacle doesn’t repeat itself. In fact, it has been reported that eBay is considering switching its Sun Microsystems computers for IBM or Hewlett-Packard PCs, just to make sure.
I believe that what happened to eBay this week has little to do with its continuing ability to turn a profit. Instead, it has everything to do with the inherent uncertainty of the current Internet-driven stock market.
The bottom line is that eBay has been elected the poster child for that element of risk.
On Wall Street, risk is a dirty word. That’s why I think eBay doesn’t get the respect it deserves — even though it’s in the black.
What do you think? Let’s talk about it.