March 11, 2001

uring the bull market of the 1990's, great towers of Babel, like the one in the biblical region of Shinar, were erected by much of corporate America. From these towers spewed the spin on company performance or prospects that was needed to support swollen stock prices.

Unlike the outcome in Shinar, where the tower builders were thwarted by a confusion of tongues, now investors are the frustrated ones. They must make sense of the blather masquerading as financial information emanating from many companies today.

At last, though, somebody is pushing corporate America to stop the gibberish and get back to the practice of dispensing meaningful information on financial results. That somebody is the New York Society of Security Analysts' Committee for Corporate Governance.

The particular tower of Babel under assault by the society is the one that Jeff built. Jeffrey P. Bezos, that is, chairman and chief executive of Amazon.com. The Internet retailer is the subject of a forum sponsored by the society to tackle the issues of confusing financial information facing investors today.

The forum, headed by Gary Lutin, an investment banker at Lutin & Company in New York, focused on Amazon because so many investment professionals were having trouble plumbing the company's financial releases. "An assemblage of Wall Street's best and brightest couldn't validate Amazon's projections of cash flows based on the information it provided," Mr. Lutin said. So the forum was set up last June.

At first, Amazon executives agreed to participate. But when forum participants asked the company for information they needed to validate its financial projections, Amazon declined.

Last month, Ravi Suria, a convertible-bond analyst at Lehman Brothers, wrote a report predicting that the company would face a creditor squeeze this year. Mr. Suria based his view on a traditional analysis of Amazon's working capital, its current assets minus current liabilities. He said Amazon's working capital would probably go negative this year.

Because working capital is monitored by a company's creditors and vendors, this raised the prospect of a squeeze. To the press, Amazon called the analysis "silly" and denied that working capital was linked to a company's ability to survive.

Clearly false. So last Thursday the forum sent a letter to Mr. Bezos, as chairman of Amazon's board, seeking information to back up the company's comments.

No support could be found, the letter said, for management's public assertions that its suppliers would ignore established standards of credit analysis based on working capital. The board should state procedures for "defining, monitoring and enforcing the company's policies regarding representations to investors," it said.

All of the forum members at a recent meeting believed that the risk of a disruptive financial crisis within a year at Amazon was high, the letter added. "Prudence requires contingency plans for protection of shareholder value," and the board should inform investors of such plans, it said.

Referring to a report in The New York Observer that L. John Doerr, a prominent venture capitalist and Amazon director, had called Lehman's chairman to try to suppress Mr. Suria's report before it came out, the letter said: "The board is asked to state its position regarding the rights of analysts to express their views and regarding the rights of investors to hear those views."

Bill Curry, an Amazon spokesman, said: "We have received the letter. We have nothing to say about it." The society is fighting for the right of investors to accurate financial information. High time somebody did.