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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 249.14+0.3%Nov 11 3:59 PM EST
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To: Eric Wells who wrote (109808)10/7/2000 7:40:59 PM
From: Glenn D. Rudolph  Read Replies (2) of 164684
 
Glenn - you don't think ARBA is a momentum stock? It has no PE (it has huge losses - yes, the
losses are from recent acquisitions - but even if you strip out the amortization of goodwill
from the acquisitions you still get an operating loss), it has a price to sales ratio of 124 and
it's operating in a very hyped yet unproven market.


Eric,

ARBA is far different than Amazon. First off, operating losses for Q2 2000 excluding amortization of Goodwill was $16 million. That is not huge. Secondly, ARBA is cash flow positive and has about $500 million in debt. ARBA is growing into a large company and is drawing a diverse customer base with expanding technology. ARBA is integrating the entire process from procurement all the way to logistics which provides a large variety of high margin revenue streams. The gross margins are 83%. There are less than 15% of the major companies now using on-line procurement and my opinion is they all will be doing that within a few short years.

The valuation of ARBA is high but I believe it deserves to go much higher. This is far from AMZN.

AMZN had terrible gross margins in the past and still do. Amazon was never cash flow positive as far as I can recall. If they were, it was brief and a very small amount. AMZN had to deal with distribution and my opinion is B2C on-line sales will never be as large as B2B. The short of this is Amazon is a retailer. Ariba is not.

Glenn
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