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COMMENTARY

Amazon crosses US$1t line, second US firm after Apple to do so

Its shares rose to US$2,050.50 on Tuesday, pushing it over US$1t before falling back

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Amazon captures 49 cents of every e-commerce dollar in the United States, employing more than 550,000 people and generating US$178 billion in annual revenue.

San Francisco

WHEN Apple's market value crossed US$1 trillion last month, the reason was simple: It makes devices that a lot of people are willing to spend a lot of money on.

Now Amazon has become the second American company to cross that once-unimaginable line. Its shares rose as high as US$2,050.50 on Tuesday morning, pushing it over US$1 trillion in value, before immediately falling back and then ending the day at US$2,039.51, below the US$1 trillion threshold. Amazon's founder and chief executive, Jeff Bezos, is worth nearly as much as Bill Gates and Warren Buffett put together.

This time, the explanation is more complicated. Amazon captures 49 cents of every e-commerce dollar in the United States. It employs more than 550,000 people and generates US$178 billion in annual revenue. It sells everything from computing space to peanut butter to appointments with plumbers.

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But the thing that it has always sold the most - to investors, customers, the media - is excitement.

In the beginning, Amazon was an exciting new way to shop for books: online. Then it was an exciting new way to read (Kindle e-books), an exciting new way to publish (CreateSpace), an exciting new way to power the Internet (Amazon Web Services), an exciting new way to get deliveries (Amazon Prime), an exciting new way to make your house a high-tech outpost (Alexa).

Long before Amazon went to Hollywood and began making movies, it was the star of its own show, generating vast amounts of attention just for being Amazon. No other company had ever managed to turn its lack of profit into such effective drama, or the question of what its next move would be.

Amazon's search for a second headquarters, the company having run out of room and patience in its hometown, Seattle, set off a nationwide frenzy among politicians. Mr Bezos even gamified his philanthropic plans, taking to Twitter to solicit advice about what he should do. (One popular recommendation: Pay your warehouse workers more.) Would Amazon collapse, or would it eat the world? It was the corporation-as-reality series, and it has been a long-running hit.

One of the great benefits for Amazon of this approach is that it is impossible to tell where reality ends and hype - or perhaps even madness - begins.

Take Amazon's drone programme, which it first announced on 60 Minutes. "I know this looks like science fiction," Mr Bezos said, as he showed a film of an unmanned vehicle delivering a package. "It's not." He said that there were "years of additional work" to be done, but declared himself an optimist. Drone delivery, he predicted, would be a reality in "four, five years". That was December 2013. Roughly a million features were written about Amazon and its drones, nearly all with the subtext: Isn't this the coolest thing ever?

Over the years, the company kept raising the stakes, as if they were not already high enough. Amazon applied a few years ago for a patent for an "aerial fulfilment centre" that would float at 45,000 feet. Drones would fly out of it with your order and then glide down to your backyard. What delivery could possibly be important enough to merit such a crazy system? The patent has a suggestion: "Prepared hot food." We wanted flying cars, but we got flying burritos instead.

Even if the drones do not pan out, they have kept attention focused on the company, fulfilling a different part of the business plan. There is scarcely any oxygen left to discuss the more contentious aspects of Amazon - such as its scorn for taxes or its plans to capture much of local government purchasing.

"There is no doubt anymore," said Ron Nussbaum, who runs an investment management fund called Maverick Value in Los Angeles. "The stock always goes up - and no one doubts it will keep going up." Mr Nussbaum, who emphasised that overall his investments were profitable, might be the last Amazon sceptic. "It's an honour," he said.

And an expensive one. Last year, when Amazon crossed US$1,000 a share, he started buying "put" options - bets that the stock would decline. One of his puts has dropped 85 per cent; another, 92 per cent.

Mr Nussbaum is planning to buy more. He thinks that people are confusing their impressions of Amazon the company with Amazon as an investment.

"If I fill up your gas tank for $1 but it costs me $2, you can say it's a great product but it doesn't make any sense as a company," he said.

Apple had profits of US$48 billion last year. Amazon's were less than a 10th of that. If profits were all that mattered, Amazon should be worth about US$100 billion, the size of United Technologies or Texas Instruments. That is nothing to sneeze at, but nothing to get people excited either.

Even before Amazon hit US$1 trillion, the milestone was old news. There was a poll on Facebook run by a group of young Wall Street investors. The question: Would Amazon or Apple be the first to hit US$2 trillion?

The vote was overwhelmingly in favour of Amazon. Dreams will always triumph over devices. NYTIMES