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Wall Street to Amazon: Picture This

Shares of online retailer Amazon.com were down substantially this morning as investors reacted to an analyst's concerns about the company's rapid expansion following the announcement of a deal to open a camera and photo store.

The store was launched in conjunction with ofoto.com and offers both digital and conventional photography equipment and services. Ofoto Inc. was founded last year and offers secure online photo storage, film and digital processing, quality silver-halide prints, and photo display and storage merchandise.

Contributing to the stock price decline was an appearance on CNBC television by Robertson Stephens analyst Lauren Cooks Levitan, who said that with the company's present business model, she doubted it could ever turn a profit. In fact, Amazon has yet to make any money.

CBS MarketWatch.com quoted Levitan as saying in a research note to clients that initial findings from a proprietary research study of Amazon's fulfillment efficiency "exposes weakness in the online retailer's current business model."

The company's rapid product diversification -- from books to music, movies, toys, tools, hardware, software, kitchenware, lawn and patio items, and cars -- was called into question.

At mid-morning, Amazon was down 6.6 percent, trading at $32.75, down $2.31. The stock opened at $33.43, after closing yesterday at $35.06.

The deal with Ofoto lets customers send their digital photos over the Internet -- or their film through the mail -- and Ofoto will create online photo accounts containing the pictures. Financial terms were not disclosed.

Amazon.com has said it is seeking to be a company where customers "can find and discover anything they might want to buy online." Amazon.com lists more than 18 million unique items

"The Amazon brand has become synonymous with access to everything, Levitan was quoted by Bloomberg News as saying. "Could any amount of planning allow them to run fulfillment facilities (that warehouse and handle orders) for 18 million products?"