Amazon falls as Wal-Mart deal appears to fade
By Scott Hillis
SEATTLE, March 6 (Reuters) - Amazon.com Inc. <AMZN.O> shares sank 6 percent on Tuesday, reversing earlier gains after a report poured cold water on investor optimism that the online superstore could join forces with retail powerhouse Wal-Mart Stores Inc. <WMT.N>., analysts said.
Amazon shares rose in early Nasdaq trading amid a rally in tech stocks, but ended the day off 3/4 at $11-7/8 after a report in the online edition of the Wall Street Journal said a tie-up between Amazon and Wal-Mart was not expected soon.
"It is down because now it looks like they may have been in talks some time ago, but now it doesn't look like anything's occurring for the near-term," said Kristine Koerber, an analyst with WR Hambrect & Co.
Amazon and Wal-Mart declined to comment on the report.
Amazon, which has lost about 80 percent of its value over the past year amid concerns it will never turn a profit, surged 28 percent on Monday after a report said its Chief Executive Jeff Bezos had met with Wal-Mart Chief Executive Lee Scott to strike a deal for Amazon to handle Wal-Mart's online strategy while gaining a foothold in the chain's 4,500 stores.
"Investors are just looking for anything positive on Amazon, and any partnership with Wal-Mart would be seen as positive," Koerber said.
"We ... frankly don't know what a partnership with Wal-Mart would look like. What categories, where, would this be international or domestic? I really don't know how something like this would work out."
AMAZON UNDER PRESSURE
The Journal, citing a person familiar with the issue, said Amazon and Wal-Mart had recently held exploratory talks about a possible alliance but that it was unlikely any agreement would be struck soon.
The two sides were not actively talking now, although there was still the possibility of a future deal, it said.
The latest report could weigh further on Amazon, which has moved in recent weeks to shore up its bottom line by cutting staff, eliminating unprofitable items and adding new revenue streams like charging book publishers to promote their books in e-mails to customers.
Bezos has pledged Amazon will turn a pro forma operating profit -- which excludes things like acquisition costs and payment of debt interest -- by the end of the year, but questions linger over whether the company will have enough cash to see it through.
"It (the report) will probably put some added pressure on the stock tomorrow or over the next couple weeks as it looks like a deal may not happen soon," said Jeetil Patel, an analyst with Deutsche Bank Alex. Brown.
Wal-Mart largely stayed on the sidelines of the e-commerce boom of the past few years, only making a serious push into the sector last November with the relaunch of Walmart.com.
But the Web site revenues are a tiny portion of Wal-Mart's overall sales -- which hit $56.5 billion in the fourth quarter -- and it too has battled the flagging Internet climate, laying off 10 percent of Walmart.com staff, or 24 people, last month to conserve cash.
19:02 03-06-01 |
