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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn D. Rudolph who wrote (61320)	6/8/1999 9:59:00 PM
From: Bill Harmond	Read Replies (1) \| Respond to of 164684

>>The longs in this stock are entitled to know this information. I'm long, and think he should keep it to himself. Everyone in etailingt is gunning for him. The less said the better.

To: Glenn D. Rudolph who wrote (61320)	6/8/1999 11:00:00 PM
From: Winston Lee	Read Replies (3) \| Respond to of 164684

Glenn, I have always been impressed with AMZN ever since I purchased my first book from them 2 years ago. However, I could never commit myself to purchase their stock, opting instead for companies with scalable business model such as YHOO EBAY EXDS EGRP and INKT. However, the more I think about AMZN, the more bullish I get for the following reasons: 1. AMZN is preparing for future margin explosion by destroying or rendering competition insignificant in the early stages. YHOO could have rendered SEEK, LCOS, and perhaps even XCIT inconsequential if it had moved aggressively to consolidate the portal sector, and NSCP might have been able to defeat all of them if it had the right strategy. AMZN is preoccupied with market share, with building a singular dominant brand for e-tailing and improving its competitive position vis-à-vis the competition. After it has rendered competitors insignificant players in each sector that AMZN competes in, the margins will rise dramatically because it will have pricing power. 2. Brand, brand, brand. In the minds of many consumers, AMZN is THE DOMINANT e-tailer. Companies such as TWX and DIS thought a few years ago that if they put a website, consumers would flock their site. WRONG! Developing a dominant brand such as AMZN will be very difficult, if not impossible even for these multinationals, at this point. 3. Market power. AMZN has already developed market power in each sector in which it competes, except in auction business. 4. Developing brand and market power are much more difficult than figuring out how to make money with these tremendous leverages. I think AMZN will make money in the following ways: (a) Bread-and-butter e-tailing business: 1. negotiating power with manufacturers through bulk purchases, etc. 2. critical mass – variable cost will continue to decrease as the customer base & order flow increase. AMZN is currently spending massive amounts of money for fixed costs such as distribution centers, etc. These fixed costs are largely one-time costs (not recurring costs). 3. Technological enhancements – AMZN is investing huge amounts to establish the necessary technological infrastructure for online e-tailing. Huge economies of scale will kick in after a comprehensive technological system is put in place. As order flows skyrocket, only minor improvements in technology will lead to economies of scale, hence margin expansion. 4. Future pricing power – when AMZN is the dominant retailer left standing, it will have greater pricing power, after the buy.coms of this world are rendered insignificant. 5. Continued explosion in revenues is leading to lower marketing and other variable costs (on a per customer basis). At some point, marginal revenues will dramatically outpace marginal cost. 6. As market power increases, it will be easier for AMZN to conquer the next retailing sector. Watch out Toys R Us and ETYS – you may get Amazoned! (b) New value-added (i.e., high-margin) businesses: 1. Some form of advertising in certain areas within AMZN site, perhaps through banner ads, links, etc. 2. “storefronts” where other retailers can advertise or conduct business on AMZN site. For example, a user may be able to click on “cars” within AMZN site and there may be automobile companies such as Suzuki, SAAB, Hyundai advertising their services, products, etc. 3. Smaller retailers without much money may conduct business on AMZN site in return for a portion of sales proceeds. For example, if an AMZN user purchases shoes from a small shoe retailer which has a link, storefront, etc. on AMZN site, a portion must be given to AMZN. The new business possibilities are numerous, and I have the fullest confidence in Bezos to make money at some point in the future. Barron's article discussed none of the above points, shallow in nature, and most importantly, did not even speculate as the grand vision that Bezos may have. However, AMZN currently continues to develop its brand and market power and will continue to do so until it reaches such dominance when all of the above are possible. I'll be buying more AMZN tomorrow morning and will make it my number 1 holding this year. Regards,