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

AMZN 232.38

+0.1%

Dec 24 12:59 PM EST

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To: Slumdog who wrote (44253)	3/6/1999 8:11:00 AM
From: brian z	Read Replies (2) of 164684

from Weekly Web Report WHY WORKING THE DATABASE IS GOOD FOR AMAZON AND ITS INVESTORS: This week some investors seemed spooked by selective promotions Amazon made via e-mail to selected customers. We think several people concluded that if Amazon was selectively offering coupons, its only objective must be to drive Q1 sales with a few weeks remaining in the quarter. This conclusion is inconsistent with our understanding that different e-mails were sent to different former customers including some messages which were simply friendly reminders about Amazon with some recommended titles. Amazon has shown strong customer retention and high levels of repeat purchases. While we have been troubled by the efforts of certain e-tailers that regularly hold 30%-off sales on their entire product lines, we are not at all concerned about Amazon's recent initiatives. In fact, we believe the company has been selectively testing different customer groups and different promotional tools all along and we are impressed by the company's seemingly increased sophistication in working its large database. These online initiatives have tended to provide high conversion rates. We expect Amazon will continue to take advantage of these proven direct marketing techniques. EBAY AND AMAZON – THE STRONG GET STRONGER: We believe that recently released MediaMetrix data indicate that eBay and Amazon are experiencing strong continued momentum from the holiday season into Q1. Specifically, during January, eBay's unique visitors increased 11.8% to 6.138 million users versus 5.491 million users during December and average minutes spent per user surged to 140.2, a 10.7% increase from December. We are impressed by this sequential increase. We view these continued strong traffic trends as further indication that eBay is achieving mass-market status and the company's marketing initiatives and valuable PR have accelerated the company's growth. Additionally, we believe the increase in usage minutes provides us with an early, but positive indication that eBay's new users are becoming just as addicted to the Web site as the first users who made eBay the predominant person-to-person auction site. Amazon's January reach numbers provide us with increased confidence that Amazon.com is on track to at least achieve the sequential growth assumed in our Q1 revenue estimate of $260.0 million versus $252.9 million in Q4:98. We believe the modest sequential decline to 9.033 million unique visitors from 9.134 million users during December 1998 demonstrates Amazon's ability to attract new customers and retain the customers it gained during Q4. Further, we are impressed that growth in consumer interest in on-line shopping and Amazon's leadership in e-tailing effectively eliminated the normal seasonal downturn in sales posted by land-based retailers immediately following the holiday season. For example, land-based retailing giants Wal-Mart (WMT $87 ¾) and Gap Inc. (GPS $68 ¼) posted fairly typical sales declines in January of 50% and 67%, respectively (we note December sales reflect a five-week period versus a four-week January period). While traffic does not equate directly to sales (given varying trends in conversion rates and size of average transaction), we view the traffic results as a good proxy for the sales potential of an e-tailer. Further evidence of sequential revenue growth in Q1 coupled with the company's recent investment in Drugstore.com point toward Amazon's evolution into a true e-tail portal. These factors increase our confidence the company can grow into its current valuation and are consistent with our Strong Buy rating.

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