Sarmad, I'm scratching my head trying to figure this out.
Any thoughts?
>Seattle, June 24 (Bloomberg) -- Amazon.com Inc. has more to worry about than its own dwindling stock price. The value of its investments in five other publicly traded Internet retailers has dropped more than $1.5 billion from its high.
Amazon.com, the Internet's biggest retailer, has bought stocks in Drugstore.com Inc., HomeGrocer.com Inc., NextCard Inc., Pets.com Inc. and Ashford.com Inc. -- moves to broaden the variety of products it offers without investing in inventory and distribution.
While Amazon.com says it's still in the black on those investments, since it often took positions at low prices before the companies went public, the value of the holdings has declined in value from $1.93 billion at their collective highs to about $370 million.
``These investments did help round out their product offerings, but Amazon could have bought in at a lot cheaper prices,'' said Dalton Chandler, an analyst at Needham & Co.
Shares of Amazon.com on Friday tumbled 19 percent -- dropping 8 1/8 to 33 7/8, the lowest level since December 1998 -- on concern the company may miss sales forecasts and run out of cash. The stock has tumbled from a peak of 113 in December, meaning it's lost $28 billion in value.
Amazon.com's strategy to diversify its products was a sound one, analysts said. But they question the method Amazon.com used.
``Cash investment wasn't the way to go,'' Lauren Levitan, an analyst at Robertson Stephens & Co., wrote in a report.
She said by investing in other publicly traded companies, Seattle-based Amazon.com was adding to its volatility.
Stakes
And volatile these investments have proved.
-- Drugstore.com. Amazon.com holds 12.35 million shares, or 24 percent, of the Internet pharmacist, paying an average of $6.04 a share for its stock. In January, Amazon.com bought more than 1 million shares at 28 1/8 each.
Drugstore.com's stock has fallen from a high of 70 in July to 6 5/8. So while Amazon.com's still barely ahead of its investment, the value of its stake has fallen by more than $775 million from its peak.
-- HomeGrocer.com: Amazon.com holds a 21.6 percent stake, or 27.7 million shares, in the largest Internet site selling groceries. HomeGrocer.com shares traded as high as 16 1/4 earlier this year and now trade at 8 3/32. Amazon.com's stake, once worth $450 million, is now worth about $225 million.
-- NextCard: Amazon.com holds a 7.9 percent stake, about 4.4 million shares, in NextCard, which issues MasterCard and Visa credit cards on the Internet. NextCard's stock has tumbled from 53 1/8 in November to 8 5/8, reducing the value of Amazon.com's stake from $233 million to about $38 million.
-- Pets.com: Amazon.com holds a 30 percent stake, or about 9 million shares, of the online pet-store company, whose shares have dropped from a high of 14 in February to 2 5/16. Amazon.com's stake is now worth about $21 million, down from $126 million.
Investments
-- Ashford.com: Amazon.com bought a 17 percent stake, about 7.4 million shares, in the online luxury good retailer in December. Ashford.com's shares, which once traded as high as 35, now trade below 3. Amazon.com's stake has dropped from $259 million in value to less than $20 million.
Amazon.com's investments in public companies are up about 50 percent from when the Internet retailer put in its money, said spokesman Bill Curry. Investments in private companies are probably up about the same amount, he said.
It's also signed agreements for investments in closely held companies including Della & James Inc., a wedding gift registry; auto retailer Greenlight.com; delivery service Kozmo.com Inc.; furniture and home-goods seller Living.com; and sporting-goods retailer Gear.com.
The company may make even more investments.
``When it makes sense for shareholders and customers, we'll do the right thing,'' Curry said.
Amazon.com was formed in 1994 and began selling books on the Internet in 1995. The company went public two years later, and has since expanded its offerings to include toys, electronics, patio furniture and other merchandise.
Amazon.com is not the only corporate investor to see a steep decline in the value of its venture holdings. Dell Computer Corp. and Microsoft Corp., among others, have invested in other companies from Calico Commerce to Healtheon/WebMD Corp.
>Kozmo.com, which sells and delivers music, food, magazines and other items in 10 U.S. cities, has raised money from five venture capital firms. Earlier this year, Kozmo.com received a $60 million investment from Amazon.com Inc., the biggest Internet retailer. |
