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

To: dbblg who wrote (79257)	10/1/1999 7:58:00 AM
From: Glenn D. Rudolph	Respond to of 164684

There is a theme here from Robertson Stephenson first: "AMAZON -EVOLVING INTO THE FIRST eTAIL PORTAL - Amazon's stock jumped more than 22% on Wednesday's news that through its new zSHOPS program, its valuable Web storefront is now available (for a fee) to any merchant interested in selling online. While some critics interpreted this move as an indication that Amazon's business model is flawed, we saw this move as Amazon's opportunity to solidify its position as the most dominant online shopping destination. Our positive investment thesis for Amazon has long been based on our belief that the company is uniquely positioned, given its 12 million customers and solid brand presence that connotes expert status in online shopping, to transition into a Web landlord. Through zSHOPS and the company's expanded search functionality, we believe Amazon.com can extend its brand to represent a gateway to online shopping for both consumers and other merchants alike. We particularly like the high margin, fee-based revenue stream that the new shopping format affords Amazon. Over time, we expect that tiers of merchant partners could emerge (borrowing a page from the AOL playbook). We fully expect this area to evolve over the coming months (we would like to see a more visually appealing presentation of items for starters) with a wide range of retailers, vendors and eTailers experimenting with this forum as a low cost means of reaching the single largest audience of qualified online shoppers. We did not change our estimates for Amazon based on this announcement, but firmly believe that this move, if executed solidly, should allow the company to continue to exceed expectations. More importantly, we believe Amazon's growing opportunity to participate in an increasing share of total eTailing transactions warrants a valuation in excess of current levels." From Blodgett at Merrill: "Amazon.com ? 29 September 1999 2 n Key Points 1) Amazon.com is finding ways to monetize its large and growing audience. 2) This new model is a ?Virtual Model?, like the model that AMZN started out with and should improve long term gross margins. 3) The model works a lot like e-Bay?s auction model but could be even more powerful because it is fixed price model and allows any seller to establish an online store. n Overview Amazon.com announced this morning the introduction of Amazon ?zShops?, ?Amazon.com Payments?, and ?All Products Search?. This announcement effectively empowers anyone who wants to sell product on the internet to establish an e-commerce business. With the introduction of these three new innovations, Amazon.com has significantly advanced and improved how people shop and sell on the Internet. Starting Thursday, more than 500,000 new items, will be available on Amazon.com through its new ?zShops? program. With ?zShops?, anyone - regardless of size, product or location - can sell online. This lets Amazon.com add thousands of items to its site overnight, without huge start-up costs. ?zShops? allows anyone who wants to sell anything to list it on Amazon?s site and market it to Amazon.com?s large audience. ?Amazon.com Payments? will enable easy payment between buyer to seller. It allows individuals and small businesses to accept payments through Amazon.com?s 1- Click payment feature, thus eliminating what is considered the greatest inconvenience of online transactions between individuals: the delays and hassles of sending checks and money orders through regular mail. This is very important as well because it enables small businesses and individuals to accept credit card payments that they would not otherwise be set-up to accept or process. The ?All Products Search? feature helps shoppers find anything for sale on the net, providing customers with a convenient, easy-to-use guide for finding exactly what they want among the net?s millions of offerings. This customized Web search engine is dedicated solely to shopping. Sellers pay $9.99 a month for Web space on Amazon.com to sell up to 3,000 unique items through zShops. If a seller only has one thing to offer, it costs just 10 cents to list each item for two weeks. Sellers who use Amazon.com Payments with 1-Click will pay a $0.60 cent per transaction fee plus 4.75 % of the final sale. Sellers are required to stock the items they are offering and are responsible for shipping the products promptly. n Conclusions We view this announcement as a significant positive for Amazon as this model is similar to eBay?s auction model but we believe it could be more powerful because it is a fixed price model. At this time there are no changes to our estimates; however, we feel more comfortable about long term margins. There has been concern about AMZN?s build out of its bricks and mortars warehouses and its drain on margins. We view the introduction of this virtual model as a positive for margins as Amazon.com will not be taking inventory of these items but simply matching buyer and seller. AMZN remains a core holding in our ?99 Holiday Basket. We are maintaining our Buy/Buy rating on the shares. [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. "