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'Break up Amazon.com'

Glorified catalog, or tech platform? Time to decide

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Analysis You can hear it on every earnings call. Wall Street's frustration with Amazon.com is growing, and recently, it's broken out into open insolence.

Two years of declining profits at the internet retail behemoth have left analysts wondering just when Amazon.com's technology magic is going to pay off.

"It seems like Amazon is a company which will perpetually be in investment mode," observed Piper Jaffray's Safa Rashtchy recently.

Worse, analysts are even questioning the fundamental proposition of internet retail, with Prudential's Mark Rowen asking:

"Why is it that we are not seeing efficiency if, in fact, the model is more efficient?"

Each year Amazon's profits diminish - and they've been shrinking as the economy has picked up - it offers the excuse that it needs to invest more in technology. But which business is Amazon really in?

Amazon wants to make search technology horizontal - licensing its own search engine - and this week offered itself up as a storage retailer. It's offering excess capacity on its own servers to all comers as a web service, called S3, for 15 cents a gigabyte. That's about as far from selling Harry Potter as you can imagine. So is it a technology platform, or an online shop?

Now Nick Carr has renewed his call for the retailer to get focused, and split its technology business and retailing businesses.

"If Amazon is serious about expanding its tech business alongside its retail operation," writes Carr, "its economic, managerial, and organizational conflicts will only grow more severe. It doesn't take a Solomon to see that this baby should be split in two."

Meanwhile, CEO Jeff Bezos has his eyes fixed firmly on ... er, nowhere. There must be easier ways of meeting Esther Dyson, than building your own space transportation.

Which only leaves the question - who gets to keep Amazon.com's portfolio of whacky patents? ®

Bootnote: Carr's book Does IT Matter? makes a strong case for IT buyers to stay away from bleeding edge technology. Silicon Valley reacted as it usually does - by shooting the messenger.

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