Merrill Lynch and Amazon.com Taken to Woodshed

Both Merrill Lynch & Co. and Amazon.com took a beating earlier this week — one for entering the world of e-commerce too late and the other for being a pioneer that’s still not showing a profit.

When Merrill Lynch gleefully announced Tuesday that it was finally joining the ranks of online brokers, the reception it got was far from enthusiastic. Christos Cotsakos, E*Trade’s chairman and chief executive told Bloomberg: “We have different views of the future, and we’re approaching it from two different directions. They’re reengineering and we’re reinventing.”

Many analysts agree with Cotsakos saying that the No. 1 investment company made a major blunder by waiting so long to climb into the ring. By allowing smaller companies with fewer assets — such as E*Trade — to get a strong foothold in the online trading arena, Merrill Lynch is being accused of doing too little too late. Moreover, Wall Street showed its displeasure in dollars and cents as Merrill Lynch stock fell more than $8 per share the day of the announcement.

The same day, Wall Street also hammered Amazon.com — not for being a Johnny-come-lately — but for being a pioneer that sells a ton of product, yet has never made a dime. The price of Amazon’s stock dived almost $13 a share after an article published in Barron’s warned that the e-commerce giant’s other online business is being threatened by a rising number of book publishers and record companies now encroaching Amazon.com’s once exclusive e-commerce kingdom.

The article also criticized the company’s foray into music and medicine, citing the lower profit margins. Finally, the fear of what will happen to Amazon.com when big players like Wal-Mart finally decide to declare an e-commerce war also worries a legion of analysts.

“Traditional companies have spent 1-1/2 to two years drawing up battle plans and now they’re starting to engage in war,” Frank Drazka, of Paine Webber told Bloomberg.

Nevertheless, some industry experts say despite Merrill Lynch’s late and rather clumsy entry onto the e-commerce battlefield, the company has the resources to prevail in the long run. But many wonder if the same can be said about Amazon.com?

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