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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 230.55-0.5%10:44 AM EST
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To: Sarmad Y. Hermiz who wrote (54261)4/30/1999 1:23:00 PM
From: Rob S.   of 164684
 
The report hardly exceeeded expectations. Losses were lower than expected but the tone of the conference call was for more growing pains over the next few quarters and increased losses. Amazon did increase their registered customers to over 8.4 million but sales did not increase propotional to that - up about 16%. The sales number looks pretty good, better than expected before the lattest acquisitions, but Amazon would not break out the numbers. And they were fuzy about a lot of other questions or just wouldn't answer them. That leaves questions about how solid the growth will be going forward.

One positive factor was that gross margins increased by 1%. Although that could just be noise rather than a trend, Covey indicated that a richer product mix was sold and they hope to reduce costs in the future as the new automated distribution facilities are utilized. During the next several quarters these facilities will have a negative impact on earnings as much of their capacity will go unused. In the long run this expenditure makes good business sense and should be considered "inevitable" for every massive Internet retailer.

I think the report was OK which probably isn't good enough to sustain a rally. Forecasts will need to be revised downward and projections for eventual profits pushed out another year or two. The company has saturated their management bandwidth and that limits their ability to respond aggressively to market opportunities.
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