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Strategies & Market Trends : Internet Slaughter

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To: Michael Burry who wrote ()	12/29/1998 6:24:00 PM
From: Michael Burry	of 3

My response to the story re: Amazon.com putting independents out of business: What's even more concerning is that Amazon.com doesn't have to be making money in order to force others out of business. The independents point to Amazon.com, but it is this rabid bull that is the culprit. I work in Palo Alto (the city in the story in your link), and certainly many of us here do buy books online. But for only one reason - it's typically 30% cheaper or more. That's obviously below Amazon.com's profit margin. Scale? Well, Amazon.com loses more money the more it sells. And given its model, you have to wonder where the efficiencies will come in to change this situation, since it is already so efficent that it doesn't have to carry inventory. So you have a business that can print capital by issuing stock to insane investors to support its horrid bottom line, and it is putting out of business perfectly good businesses operating on the funny theory that you have to cover your costs with your revenues. Of course, Amazon's game cannot be kept up indefinitely. Something has to give. Even the analyst that gave it a $400 price target said that it takes a lot of faith to believe that Amazon.com will be profitable in the next 5 years , if ever.

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