I think there is an interesting issue that most longs do not realize.
The issue is bottom line profitability, granted it can be eventual and not immediate. So either AMZN will eventually make a lot of money (case #1) or it will not (case #2). Case #2 has been discussed many times on this thread. But for a moment let us look at case number #1. Let us assume that through some stroke of magic AMZN is making 200M+ in net profits a year.
Well in that case there could be a very strong competitor that can not be dismissed with the bricks and mortar analogy - MSFT. Before you flame me please accept the following facts:
1. Bill G. is very interested in making money from transactions - look at his Expedia, MS Investor, real estate sales over the Internet etc.
2. Bill G. is now involved in opening an online retail software store so the technology to deliver book sales is trivial.
3. As far as brand loyalty, computer users have time and again demonstrated their preference for MS branded products over everything else. BTW MSFT is already a huge book publisher in their own right.
Now assuming that Bill G. is interested in pursuing business opportunities that make money (any arguments???) why not just buy AMZN. The answer is simple, Bill is not stupid. He certainly does not need their technology, he is not friends with Bezos and John Doer (they are in the SUN, Oracle, Netscape camp) and as in other cases MSFT does not make large acquisitions they simply roll their own. The long-term consequences of competing with MSFT are devastating, just ask AAPL, Lotus, NOVL, Borland, NSCP etc. etc. etc. BTW, I do not believe that it MSFT or Bill are inherently evil, they just have to much critical mass - in effect Bill is the Rockefeller of our generation.
So the bottom line is even if the business model of AMZN actually works, they will loose to MSFT. Brand loyalty is worth ZERO when MS-BOOKS (I bet that domain is already registered!!!!) is the default option in Windows '99.
Michail |
