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The dot in ".com" got a bit ragged yesterday as the Dow Jones Internet Index sank by more than 40 percent since reaching its high water mark back in mid-April. Retailers like Amazon and eBay were among those hardest hit. Amazon took an especially merciless battering, and only a week after CEO Jeff Bezos announced bold plans to spend his way out of painful Q2 1999 losses. We reckon there could be a connection between the two, but the company begs to differ. A week ago the Internet's largest retailer announced its intention to invest heavily in expansion projects despite an $0.86 per-share loss totaling $138 million in Q2. These "investments" should bear fruit, the company insists. Analysts caution that spending ahead of earnings works only if sales should increase, but CEO Bezos remained upbeat: "We hope to offer hundreds of additional market opportunities in the next few years," he chirped. Clearly Wall Street would prefer to see Amazon -- and, by extension, hundreds of other virtual companies -- exploiting "market opportunities" already in hand. Retribution was inevitable: Bear Stearns downgraded Amazon stock to "attractive" last week on news of the spending plan, shareholders bailed out in numbers, and by yesterday Amazon shares had fallen from an April high of US $221.25 to $88.44, for a 60-percent collapse. Ouch. Like many Internet entities made of ones and zeroes and preposterously overvalued shares, Amazon has grown steadily but never enjoyed a profitable quarter in its history. The company has spent lavishly ahead of earnings since birth, posted its losses without apology, and gone on to spend even more, all without much complaint from Wall Street. Expanding ahead of revenues, buying marketshare by sacrificing profits, is hardly a new twist in e-commerce, and to date the Street has been reasonably tolerant of it. But there is something unpleasantly South Korean about the practice of expanding grossly while earning nothing; and eighteen months ago we learned how painful the reckoning can be when it comes. Perhaps, by letting the e-tail giants squirm, shareholders are signaling the limits of their gullibility. And good on them if that's the case. No one needs the e-commercial equivalent of Korea, Inc. propagating wildly and uncontrollably through the Net. Most six-year-olds can grasp the notion that a profitable business likes to earn more than it spends. But the suits aren't panicking. Word on the Street says the Net market is merely correcting itself, and not a moment too soon at that. One analyst characterised it as "inevitable...healthy" at the close of yesterday's trading. Healthy or not, it's a lot of fast money lost and dreams of easy, instant fortune cruelly dashed. Yet there are hopeful signs that Net stocks could well rebound. Amazon in particular has seen its sales, and its revenues, grow steadily quarter on quarter. The company holds a reputation for exemplary customer service, a huge and attractive inventory, and brand recognition so pervasive as to make 'Amazon.com' a household punctuated word. This is a company that does everything right. Everything, that is, except turn a profit. And they may get that bit straight, now that shareholders have made their presence known. This could be a very good week for investors to buy Internet stocks. Well, those who haven't sold any recently, at least. ® See also: Daily Net finance news from The Register

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