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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 229.10

-1.4%

Dec 4 3:59 PM EST

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To: Bill Harmond who wrote (20061)	10/5/1998 11:56:00 AM
From: Glenn D. Rudolph	Read Replies (1) of 164684

>>It is not obvious that the business model does not work? It's working fine. Margins have been steadity improving. What you seem to miss is the key decision to up spending to accelerate their scale. That's an inflection. Before Amazon made that change, the previous model was on track. The question is whether acting on these hightened ambitions is justified. Willaim, What am I going to do with you?<G> Margins have improved due to the increase inventory carried by AMZN. They discovered that they were paying too much for their product by not buying direct from the publisher. This is turn added capital requirements for their inventory and additional expenses for distribution centers. This also increased the need for payroll. This was not in their plan. It never had been. I have stating this would have to occur for them to survive. Check my posts from last spring. Their expenses and need for capital will continue to increase if they wish to grow gross margins. This means that the advantage they stated they have over brick and mortar stores is no advantage at all. I predicted this shift way before AMZN management and much before Mary Meeker. Unfortunately, I am not as well compensated as Mary Meeker although I understand retail far better<VBG> You are a bright man. One I respect a lot. I told you this before. I know retail. I do not study it from afar. You may listen to Mary Meeker or you may listen to me. I will be correct. She will be wrong. Take my word on this. Keep in mind I am not comparing AMZN to YHOO. YHOO has cash in the bank and no debt. The business model is different. YHOO is pricy but not in trouble with margins and interest. AMZN has a negative book value. They have been diluting their stock quarter by quarter. Their debt increases. It is not just the aggressive marketing. It is the business model. Trust me!:-) Glenn

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