02/05/2000 - 22:00

...and New York stinks

02/05/2000 - 22:00

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If you doubt that the smell in the air is cash burning, take your nose to New York.

...and New York stinks
If you doubt that the smell in the air is cash burning, take your nose to New York.

The smell there has become a stench, especially from the crop of e-tailers who are finding that selling over the net is a lot harder than anyone thought.

Latest filings by American companies make alarming reading.

Value America, for example, has $US67.6 million in cash on hand Ð but itÕs burning it at the rate of $US46.39 million a quarter (yes, every three months).

According to a study by newspaper, U.S.A. Today, Value America has 4.4 months until the cash runs out Ð which is another way of saying 4.4 months of life expectancy.

EMusic.com has a bit longer to live with $US63.3 million in cash and a burn rate of $US12.58 million. Life expectancy? 15.1 months. Egghead.com has $US109 million in cash, and a burn rate of $US21 million a quarter.

The list makes for disturbing reading and confirms the trend seen in all previous technology (and mineral exploration) booms Ð that is, that few companies survive the start-up blues and convert development capital into recurrent earnings.

What of the big one, the giant of e-tailing, Amazon.com?

Well, it has just lost another $US122 million in the first quarter compared with $US36 million in the first quarter of last year.

Amazon is now down to its last $US1.2 billion, but at that burn rate it has about five years of survival ahead Ð unless it reverses the loss-making trend.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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