Amazon.Com Stock Tumbles As Competitors Team Up
By Andrea Orr 17:18 10-07-98
PALO ALTO, Calif. (Reuters) - Internet retailing
giant Amazon.com Inc. looked a little less invincible Wednesday as some
of its big competitors made plans to join forces.
Amazon's stock tumbled more than 10 percent following news that
CDnow Inc. and N2K Inc. , two of the biggest players in the online music
retailing space, were discussing a merger.
And Tuesday, the world's biggest book publisher, Bertelsmann AG ,
agreed to buy half of barnesandnoble.com, the online division of Barnes
& Noble Inc. .
The two deals raised concerns about Amazon's ability to remain the
dominant online retailer. Most industry analysts, however, said they
thought the market had overreacted.
As one of the first retailers to enter the online space, Amazon continues
to enjoy a large and loyal customer base of about 3.5 million. More
importantly, it has demonstrated unusual savvy for marketing and selling
goods over the Internet.
Cowen and Co. analyst Scott Rimer said Amazon's competitors would
not acquire that kind of expertise merely by joining forces. He said
Amazon's online retailing skills were fine tuned to the point of being
something like a ''secret sauce.''
Jupiter Communications analyst Nicole Vanderbilt thought the
barnesandnoble.com/Bertlesmann combination would be more
successful in the European market, but would not pose a significant
threat to Amazon in the United States.
''Amazon simply has too big a lead,'' she said. ''They have over 3.5
million customers and when you compare revenue numbers, it's
astounding.''
Although barnesandnoble.com could use its extensive network of retail
stores to help promote its online business, Vanderbilt said it is unlikely to
do so because of tax issues.
Like Amazon, barnesandnoble.com only taxes customers in a few states
where it has headquarters or distribution centers. If it were to promote its
cyberstore in its ''brick and mortar'' stores, it would have to add a tax in
all those states where it had physical locations.
The CNnow/N2K combination was perceived as a somewhat bigger
threat to Amazon, which only recently began selling CDs. CDnow and
N2K together would have close to 45 percent of the online music
business.
''It's not trivial, but I still think Amazon might have the edge,'' said
Vanderbilt. ''The question is can it convert its book customers to music
customers.'' |
