The clouds surrounding Amazon.com are thickening.

The pioneering e-commerce company's stock price continues to slide, losing 88 percent of its value since its peak 14 months ago. Half a dozen Wall Street analysts have downgraded the shares. The company's fiercest critic says he expects the Internet retailer to run out of money to adequately fund its operations later this year.

Amazon strongly disagrees with that assessment. "The company has never been in better shape," chief executive Jeff Bezos said in an interview yesterday. An Amazon spokesman has dismissed Lehman Brothers bond analyst Ravi Suria's math as inaccurate and his conclusion about a liquidity crisis as "silly."

Some of Amazon's vendors say they are past easy reassurance. Some of the publishers, manufacturers and distributors that supply the Seattle company say they are watching its cash levels very closely. Paying equally close attention are their insurance companies, which in some cases are cutting back or becoming unwilling to write policies covering goods delivered to dot-coms, including Amazon.

One electronics distributor is taking steps to protect itself. An executive at this firm said it had stopped shipping to Amazon until it pays its current bill, which is overdue. Like other vendors interviewed for this story, this executive agreed to discuss Amazon only if he and his company were not named.

"We've got the rope very tight on Amazon and all the other e-commerce accounts. We've no idea who's going to stay in business and who isn't," the executive said.

Several major Amazon suppliers interviewed said they are still being paid on time, but all stated that they are concerned. Bezos said he was surprised to hear that vendors were nervous. "We really haven't felt it," he said. "I just went to the Consumer Electronics Show, where I met with lots of vendors. They were more positive about us than they ever have been."

As for any vendors placing Amazon on hold until they're paid, Bezos responded: "We have an excellent payment record. Who knows? Maybe there's a dispute over the bill. Maybe we think we've been overcharged."

One other supplier said that it limited the amount of business it does with Amazon after its insurance company canceled its coverage of transactions with dot-coms. Limiting business with a retailer is a typical first step for a creditor trying to protect itself from loss. Other techniques would include shortening the terms under which they'll extend credit or even asking for cash in advance. No vendors interviewed for this story said they were demanding cash in advance from Amazon.

Still, since Amazon is already losing money, with $2 billion in debt and a stock that fell more than 8 percent yesterday to a new low for the past 12 months, more restrictive terms from its vendors could add to its problems.

Bezos said Amazon "is in a stronger cash position than it ever has been." He had a deputy send via e-mail several Wall Street analyst reports, which he said were "very, very clear that the notion of some sort of cash crunch is just not true."

The reports, which Bezos said should offer "great comfort," aren't totally positive. Henry Blodget of Merrill Lynch summarized his liquidity analysis by saying, "Still comfortable, but on alert." While finding some of the Lehman Brothers assumptions "illogical," Blodget said they weren't "silly."

A second report sent by Bezos, from Prudential's Mark Rowen, said the Lehman scenario is "certainly possible" if "rather unlikely." Rowen went on to criticize Amazon for other reasons, primarily its slowing growth rate. He reduced his rating to "sell," a highly unusual move for a Wall Street analyst. Even at Amazon's beaten-down price, Rowen concluded, it has more distance to fall.

"If Bezos is turning to me for help, he's in serious trouble," Rowen joked yesterday.

Bezos agreed that it was rather unusual for a chief executive to tout the work of such a negative analyst. "Thank you for appreciating the novelty of this strategy," Bezos said, laughing himself.

Short-Term Concern

From the general public's point of view, Amazon is one of the most impressive retail successes of the past couple of decades. It is by far the largest e-commerce company, selling about 11 percent of all goods sold online in the fourth quarter. Along with the auction house eBay, it is probably the dot-com most beloved by its customers. But unlike eBay, the strength of Amazon's balance sheet is constantly in dispute.

Take its payables. This is the average number of days it takes to pay its bills. Amazon's payables declined in the fourth quarter to 59 days, down from 72 a year earlier. So Amazon is paying its bills faster -- a good sign, Bezos said.

But is it? "Amazon has declared to Wall Street that they will be maintaining substantial cash balances throughout the year," said Gary Lutin, an investment banker who is chairing a forum for securities analysts on Amazon. "But the quicker Amazon pays its bills, the less cash it has on hand."

As a result, the decline in payables might mean the company is already being squeezed by vendors who want their money now.

At the moment, Amazon can pay all of its bills. But in a report released earlier this month, analyst Suria wrote that Amazon will have negative working capital in the second half of this year. That means not enough cash coming in to cover expenses.

According to Suria's calculations, the company has $386 million in net working capital. This year it will pay $130 million in interest on its debt, $120 million in capital expenditures, $50 million in announced restructuring costs and $140 million in operating losses. The result: about $50 million in negative working capital.

"Negative working capital means that the company is using its vendors to finance cash outflows in operations and interest payments, which is a nonsustainable condition," Suria wrote. A capital infusion would solve the problem, at least temporarily, but investors have been cool to new issues from dot-coms.

In early 1999 and a year ago, Amazon raised a total of $1.9 billion in debt financing. The fact that it already owes so much money makes it even more unlikely the company can borrow more, Suria wrote. More restrictive and costly forms of financing -- so-called vulture money -- are possible, but that would probably involve a restructuring of the company.

Amazon says it will have much more cash than Suria estimated. But Suria's work has received enough attention to make some creditors sweat.

Electronics distributors are firm with their customers: They want to be paid in 30 days, period. Book publishers usually are more lax, giving 60 days and more.

An executive for one major publisher said Amazon was paying its bills "as competitively as anyone." But the executive, who spoke on the condition that he not be named, said he, too, was concerned. If Amazon went under, he would lose a lot of inventory.

"Amazon is putting out a lot of 'Oh, don't worry,' and I don't know if that really cuts it anymore," the executive said. "They need to address vendor confidence in a more straightforward, technical way."

This publisher said his insurance company was still covering his dealings with dot-coms, including Amazon, but the size of the coverage had been cut and the deductible raised.

Another publishing group, one of Amazon's biggest suppliers, also said the company hadn't fallen behind. "But there's a lot of concern here," an executive said.

Blodget, the Merrill Lynch analyst who rose to prominence with his prediction two years ago that Amazon was headed for $400 a share -- a level that Blodget's aggressive estimate helped bring about -- is reasonably confident that the company will avoid major trouble.

"As long as Amazon remains on track to turn profitable by the end of this year, we believe vendors will remain comfortable that it will have plenty of cash to pay its bills, even if its working capital turns negative," Blodget wrote in his most recent report.

That profitability, much heralded by Amazon as a rejoinder to all its critics, is not as simple as it seems. It is "pro forma" profitability, which means it excludes certain charges, such as interest payments. But vendors aren't paid in pro forma cash; they want the real thing.

Amazon's use of pro forma results is controversial. Securities and Exchange Commission general counsel David Becker recently said the agency is "extremely concerned" about the increasing use of pro forma results, saying they can mislead investors. He wasn't talking specifically about Amazon.

Amazon's balance sheet is being questioned in other ways. The New York Society of Security Analysts' Committee for Corporate Governance has a continuing forum for its members on the retailer.

"We chose Amazon because of the controversy over the quality of information they're providing," said Lutin, the forum chairman. "The forum has been virtually unable to translate all of the pro forma information about Amazon's cash flow into a defined, conventional format. We asked the company to clarify, and they declined."

Meanwhile, the Center for Financial Research and Analysis, an accounting watchdog group, has complained that Amazon may be artificially boosting its results by recording certain investments as revenue. This has also drawn the attention of the SEC, which has made "informal inquiries" of Amazon.

"We're conservative in our accounting, and our outside auditors agree," said Bill Curry, the retailer's chief spokesman. Amazon says the SEC inquiry is continuing.

'Bipolar Opinions' Bezos, who founded the company in his garage in 1994, said Amazon's present is terrific and its future is unlimited. In a conference call with analysts three weeks ago, Bezos did discuss the fact that the company had just announced it was laying off 1,300 employees and closing one of its brand-new distribution centers, but he also waxed enthusiastic.

In 2000, he said, the question was whether consumers would buy things from Amazon that weren't in its core books, music and video categories. "We have now validated that, " he said. "The question now is how much of the worldwide retail market is available."

But the bigger Amazon gets, the more money it loses. Rowen, the Prudential analyst, calculated that Amazon has lost $139 for every $100 worth of electronics it sells. Overall, the company had a net loss of $1.4 billion last year, twice its loss in 1999.

The losses at Amazon reflect a larger contradiction: Flocks of dot-coms are dying, but e-commerce is booming. Noting that the Commerce Department just estimated that e-commerce sales for the fourth quarter were $8.7 billion, up 67 percent from 1999, the analysts at Zona Research said the problem clearly isn't a lack of consumer support.

Instead, the Silicon Valley consulting firm said in a research note, the cost structures of many e-commerce firms are out of whack.

"Despite revenues that are increasing robustly by any measure, companies are still spending themselves into early graves. FYI: This does not qualify as a sustainable business strategy," Zona concluded.

The Zona report did not specifically mention Amazon, but the company does spend money on things it cares about. A small example: Until recently, U.S. customers who complained about damage to a book they had received from Amazon's British affiliate were told to donate the damaged copy to a library. They were then express-shipped a new volume.

Customer-pleasing? Undoubtedly. Expensive for Amazon? Very.

A large example: This past weekend the retailer offered to ship five or more books for the cost of one -- a saving to the customer of as much as 10 percent. Any kitchen order for more than $99 also came with free shipping. For much of the last holiday season, any order at all over $100 came with free shipping.

"We wouldn't do [these discounts] if they didn't make us money," Bezos said. "The whole notion that we sell dollar bills for 90 cents is just not true."

On a more basic level, a source with knowledge of the excess inventory of electronics equipment that Amazon has offered to closeout specialists said he's surprised at the prices Amazon originally paid. These prices, as is customary in the trade, are disclosed on the offer sheets.

"They paid higher prices than if they had gotten it from Best Buy," said the source, who spoke on the condition that his name not be used. "I guess they wanted to put stuff on the shelves as quickly as possible, so they paid what they had to."

Bezos said in the interview: "There could be a very good explanation for that, but I don't know what it would be. I don't imagine we'd pay more than retail." In any case, he said, the excess inventory being sold off is "a tiny fraction" of Amazon's business.

Amazon is trying to cut costs, as the closing of its Georgia distribution center indicates. Much of its losses, the company said, are one-time infrastructure costs.

Bezos, in the late-January conference call, called it building for the future. "Over 70 percent of the losses of our company today are from investment in our international operation, an investment we make very happily," he said.

Last week, Amazon said it would close a 240-employee customer service center in the Netherlands in an effort to consolidate its European operations, which employ about 1,800 people. The employees are all being offered jobs at the other company locations.

Shutting down things is nearly as expensive as starting them. To close the Georgia center, which has eight years left on its nine-year lease, and lay off those 1,300 employees, will result in a $150 million charge, the company said.

While Amazon maintains that its growth is still unlimited, some mutual fund managers feel differently. "The near-term scope of opportunity is not what I believed it to be two years ago," Warren Lammert of the Janus Mercury Fund told TheStreet.com in December.

Last week, Janus Capital, the holding company for Mercury and other Janus funds, filed papers with the Securities and Exchange Commission saying it owned 5.3 percent of Amazon. A year ago, it owned twice that.

Bezos, too, has been trimming his holdings. Earlier this month, he completed his third sale of small portions of his Amazon holdings, which total more than $1 billion at current market prices. In late 1998, Bezos's sales brought him about $23 million. Last May it was $20 million. This month it was $12 million.

Bezos said the sale "is unrelated to any other event" and shouldn't be taken to indicate he is trying to get money out of his company while he can.

"This is about two-thirds of 1 percent of my holdings," Bezos said. "The right interpretation of the stock sale is, I wanted some liquidity and to make some other investments."

Liquidity. It's at the center of the current debate about Amazon's viability, a debate that keeps growing sharper.

"There are a lot of bipolar opinions about this company," Bezos said.Amazon.com chief executive Jeff Bezos is nothing but positive about the company.