forbes.com
First up looks to be Bol.com, the German conglomerate's European online book retailer, which is expected to lose 40 million euros ($39.8 million) on sales of 120 million euros ($119.4 million) this year. The news shouldn't surprise anyone who's had an eye on the operation, which is expected to fetch only about 150 million euros ($149.3 million).
"Bertelsmann stopped putting money into Bol.com about a year ago," says London-based Forrester Research analyst Rebecca Ulph. "At that point there was an appreciation that they were never going to beat Amazon in the business."
Bol.com simply got in the game too late to compete with Amazon.com's (nasdaq: AMZN - news - people ) European operation, and it was never able to compete with Amazon's cost-savings sales pitch. In theory, Bol.com was supposed to benefit from its affiliation with Bertelsmann's many book clubs, but in fact the two models never really meshed in a manner that enabled Bol.com to compete on price.
"Book clubs make money by buying only a few titles in bulk," says Ulph, "but to compete with Amazon you have to supply everything." Bertelsmann also failed to capitalize on its well-known book club brands by using them on the Web and instead tried to create the new Bol.com online brand without success.
Speculation now abounds that Amazon is the likely buyer for Bol, which is understandable given that Amazon is Bol's primary competitor. But such an alliance would make little sense for Bezos et al.
"Why would they want to add to their losses internationally when they are racing to break even and showing strong sales momentum under their own brand?" asks Soundview Technology analyst Shawn Milne. "They are very focused on driving toward profitability, and this would only put a hurdle in front of that."
While Amazon's survival was once largely in doubt, that skepticism has waned a bit, primarily because the retailer reported a GAAP profit of $5 million for the fourth quarter of 2001. But the company then swung back to a loss, and many analysts remain unconvinced that Amazon can generate profits consistently enough to service its $2 billion in debt.
Indeed it's unclear just who would want to buy Bol.com. "The greatest value Bol has to offer is probably its list of subscribers rather than the ongoing business," Ulph speculates. "But privacy issues could make that hard to sell." |
