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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 233.22+1.8%Nov 28 9:30 AM EST
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To: Oeconomicus who wrote (131982)9/27/2001 9:21:26 PM
From: Glenn D. Rudolph  Read Replies (2) of 164684
 
Why would vendors "no longer support AMZN's continued existence" as long as they are getting paid for the inventory they ship? They may be at risk for current A/R from AMZN, but once in bankruptcy, new sales to AMZN can be done with very little collection risk. Also, AMZN and even its other creditors have an incentive to keep them happy as a reorg can't work without them.


Bob,

Most larger vendors supplying large firms buy insurance to guarantee they will be paid by their customers. Amazon's current working capital is insufficient for most insurers to be willing to take the risk. Therefore, the vendors cannot get insurance. These vendors have no incentive to take on risk and sell to Amazon. The amount of their product that sells on a world wide basis will be the same if they just offer it through a different sales channels. Amazon's current cash burn and cash balance makes it impossible for them to pay their vendors in full after Q4. This is likely the catalyst for the recent number of agreements with Circuit City, Target, etc. Amazon does not have merchandise to sell nor are they able to obtain any significant amount of merchandise. They are trying to sell the merchandise of other retailers who are financially far stronger. Circuit City is not really that strong in that Best Buy is eating them alive. That is another storey. Circuit City has adequate working capital for their vendors to obtain insurance.
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