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The simple answer is that they are losing money on an operating basis,
and if they never make money, they will simply run out of cash
eventually.
It is actually more complicated than that. The company claims that the
book business does make money on an operating basis, but their
financials do not allow anyone to confirm that, because advertising for
the book business v other business lines is not broken out, and there is
a lot of discretion possible in allocating advertising between current
high-volume businesses and new business. Some analysts believe that a
'normal' allocation methodology would result in the book business losing
money even today. If that is true, the conclusion would have to be that
the business has failed, eg, that with advertising costs included, AMZN
has not figured out how to sell books at a profit over the internet.
Since there are profitable book sellers, presumably one of them will be
around to buy AMZN out eventually.
Regards
DanG
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