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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 247.35+0.4%Jan 9 9:30 AM EST
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To: Candle stick who wrote (4639)5/22/1998 2:02:00 PM
From: Oeconomicus   of 164684
 
why is 1999 suddenly looking so bleak?

Interest expense. Come to think of it, her firm's role as i-banker on the junk debt is probably why she suspended her coverage, but I'd still like to know what her rating was before.

The interesting thing about these numbers is that if you back out the higher interest expense for the balance of 1998, the operating numbers are significantly worse also. $326mm less the $75mm bank loan leaves a $251mm increase in debt. At 10%p.a. for about 7.5 mos, the increase in interest expense comes to about $15.7mm. It's actually a little more since the old debt was at a lower rate, so I'll round to $16mm. On 24.2mm shares, that's only 66 cents out of the $1.01 revision.

For 1999, the higher interest expense would about cover the revision I think, but that does not diminish the significance. This clearly shows that all this borrowed money will not accelerate revenue growth enough to offset any of the burden it creates. At least not this century.

Also note that when you throw in the $55mm of charges they said they will take for the 3 acquisitions, by the end of next year we are talking a negative $4 or so per share book value. Oh, and somewhere around $15 per share of debt.

Bob
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