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What if Insiders were to BUY Kindle books

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krk   Tuesday, 12/28/10 03:43:45 PM
Re: None
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What if Insiders were to BUY Kindle books to goose up earnings?

I posted this on yahoo message board jungle. Perhaps this board can pick up my train of thought about this teflon stock..

This is a thought experiment justified by the opacity Amazon practices while putting out its famous “Best Ever” fluff PR releases timed to goose up the stock but at the same time being coy and only giving out teasers as to the actual Kindle figures.

Amazon sells a combination of low margin/ high priced merchandise together with low-priced high margin books especially e-books. Also, the dollar value of Insider sales of stock , mostly by Bezos, in comparision to Earnings, makes the manipulative action I am going to suggest a distinct possiblity.

So far just in 2010 Bezos has sold $793 million of Amazon stock (and other insiders an additional $94 million) for a total by all Insider of $887 million. Now, during the past 3-quarters of 2010, Amazon has reported total earnings (before taxes) of $990 million.

Now, one can be sure Amazon has among its Kindle books many “nobody ever heard of” high margin dud books which Bezos can download by the millions and goose up reported earnings. The amount thus spent is “just cost of doing business” for Bezos as it would facilitate keeping the Amazon shares aloft at these lofty levels he can sell into. This would permit Amazon the flexibility to sell a lot of high-priced merchandise at low or no margin and make the top-line seem super impressive. So, if Bezos were to “re-invest” just 30% of his take ($238 million) from selling Amazon stock for downloading the bum Kindle books for which Amazon might have, say, 95%+ margins, that would drop down as over $225 million of Earnings for Amazon which is 22% of the total earnings for the past 3 quarters.

For those who might hyperventilate when Amazon puts out the imminent “Best Ever” sales & earnings fluff release, the above possible modus-operadi should make you go Hmmm…


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