Amazon.com – 22 July 1999
3
If your objective as a manager is to create the highest value
for your shareholders in Year 5, the way to do it is to invest
as much as possible in Years 1, 2, and 3—especially when
the market opportunity is as vast as this one appears to be
and the rest of the industry is moving so quickly. Based on
our meetings and conversations with management, we
continue to believe the Amazon team is one of the smartest,
most disciplined, and visionary teams in the industry (or in
any industry, for that matter). For better or worse, richer and
poorer, we have faith in their abilities and decisions. We
continue to believe that they are doing the right thing.
We also continue to believe that online commerce is a
substantial opportunity and is more difficult than it looks.
We believe that the opportunity will spawn one or more
huge companies, regardless of what the industry's mature
margins turn out to be (Amazon.com is emphatically not
“Wal-Mart” — the value-propositions are very different —
but there is one important similarity: Wal-Mart is also in the
business of helping people buy stuff. Wal-Mart has poor net
margins — 2% — but helping people buy stuff is a big
business. Wal-Mart helps people buy a lot of stuff — nearly
$200 billion a year — which is why Wal-Mart has a
$250 billion market cap.). We also continue to believe that
Amazon.com is quickly extending its lead over almost every
other competitor in the market place and increasing the
likelihood that it will win in the end.
AMZN remains a small, core holding in our Internet
portfolio. We expect that the stock will continue to be
highly volatile (i.e., trade significantly below and above
the current valuation), but trend higher long-term.
[AMZN] The securities of the company are not listed but trade over-the-counter in the United States. In the US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from
registration or have been qualified for sale. MLPF&S or its affiliates usually make a market in the securities of this company.
Opinion Key [X-a-b-c]: Investment Risk Rating(X): A - Low, B - Average, C - Above Average, D - High. Appreciation Potential Rating (a: Int. Term - 0-12 mo.; b: Long Term - >1 yr.): 1 - Buy, 2 - Accumulate, 3 - Neutral, 4 -Reduce,
5 - Sell, 6 - No Rating. Income Rating(c): 7 - Same/Higher, 8 - Same/Lower, 9 - No Cash Dividend.
Copyright 1999 Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). This report has been issued and approved for publication in the United Kingdom by Merrill Lynch, Pierce, Fenner & Smith Limited, which is
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