Adviser to a New York Society of Security Analysts forum that is examining how Amazon.com reports financial information, Lutin has been pressing the big e-tailer and its dot-com brethren to stick to the basics of financial reporting: clear, precise information.
If it were up to Lutin, there would be no more mention of "fantasy" figures such as traffic numbers, customer counts, or "pro forma" profits that exclude everything but the kitchen sink.
In the wake of a report by former Lehman Brothers analyst Ravi Suria that raised doubts about Amazon's viability, Lutin sent two highly publicised letters to Amazon requesting that company executives respond to questions arising from the report. Although Amazon executives initially participated in the forum, the company has not yet officially responded to Lutin's letters.
An investment banker who founded his own namesake investment house, Lutin has long had an interest in how corporations are governed and how they relate to their shareholders. Lutin spoke with CNET News.com's Troy Wolverton last week about the need for reality-based financial reports and Amazon's reporting practices.
Why did your forum focus on Amazon?
Amazon was considered an attractive case study partly because they illustrated the types of controversy prevalent among New Economy companies generally. There were disputes about the validity of particular metrics. There were questions about what pro forma numbers actually meant, so on and so forth.
Amazon was in what I would consider to be the normal range of controversy; they were not extreme. There was no general view that they were crossing any lines beyond what was considered acceptable in that context a year ago.
We thought Amazon would make an ideal example and particularly as a participant in the program since they were considered a leader among New Economy companies and also because, unlike many (companies), they actually had what appeared to be a viable business.
What were the issues you wanted to address in the forum?
The whole issue of investor information, including audited reports and the reliability of them. But also the controversies in the dot-com area, which were not so much focused on the reliability of the financial statements as on the controversies relating to the definition of metrics and pro forma numbers.
There were lots of disputes about what was the relevant number and how was it being defined, how was it being measured. And nobody knew.
Companies were coming out with some measurement of eyeballs. Even if you accept the validity of eyeballs as a measurement that can somehow be used as a basis for valuing the company, there's no indication of how anybody was measuring eyeballs. So one company's measurement of eyeballs was different from another company's measurement of eyeballs.
