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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 220.66

+1.6%

Nov 21 9:30 AM EST

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To: tekgk who wrote (13232)	8/11/1998 8:29:00 PM
From: Rob S.	Read Replies (1) of 164684

The biggest problem with Asia is the way the banks financed deals that had little equity and only promises of a pay-out some time in the future - Hey, that sounds just like Amazon.con! For instance, the S. Korean and other Asian semiconductor whores got tens of billions to finance gigantic fab facilities to build DRAMs and other commodity semis. The pitch to the bankers was something like "We will build huge, efficient plants and employ our energetic work force to capture 55% of the worldwide DRAM market. Since we will be able to get $30 per 16 MB DRAM chip (that actually looked reasonable several years ago when projecting prices forward 4-6 years), we will make huge profits and easily pay off our huge debts plus interest." Many of these companies had debt to equity ratios of 10X or 30X (again about that of Amazon.con) while the norm for US and European businesses is around 1/3X to 2/3X. The problem with the grand plans of the Asian semi whores was that as they increased production prices plumeted. The old supply and demand theory thing - increase the supply of competition and decrease the price from where it normally would be. A large part of the money to finance these deals ultimately came from international bankers. Now these companies are selling DRAMS for less than it cost them to manufacture them and they are reportedly losing around $60 million per week! The devaluation of their currencies certainly would seem to help, but these dogs haven't learned and just beat each other down in prices even more. Give Amazon about 3-4 years and they too will be priced out of the market. Of course, they are already losing money rapidly and don't realy need more competition to help them.

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