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

To: H James Morris who wrote (92982)	2/4/2000 12:32:00 PM
From: Olu Emuleomo	Read Replies (2) \| Respond to of 164685

If you want to see momentum, take a look @ MCLL --Olu E.

To: H James Morris who wrote (92982)	2/4/2000 12:37:00 PM
From: Glenn D. Rudolph	Respond to of 164685

I have to prove my point regarding the fact the book business is likely not profitable in m yopinion and that this firm will never be profitable from operations. I have been saying for two years that fulfillment expenses exceed gross margns but many doubt me. Here are excerpts from a MSNBC story. I recommend reading th ereantire story so here is also the link: msnbc.com The numbers presented in the press releases and during the conference call also raise some perplexing questions about just how profitable the Books operation is really ? or indeed whether it is actually profitable at all if the numbers were thoroughly examined. The problem is, there?s not enough detail to know one way or another, with investors being asked in effect simply to take the company?s claims on faith. Yet those numbers that are offered make such an act of faith difficult. According to one of the press releases, roughly half the company?s revenues during the quarter came from book sales vs. 75 percent of sales during the 1998 quarter and 100 percent during the April-June 1998 quarter. During that April-June ?98 period, when the company sold nothing at all but books, it recorded a 22 percent gross profit margin, suggesting that with competitors like Barnes & Noble and Wal-Mart now in the online market, the company?s fourth quarter 1999 gross margin on books was, if anything, even less. Assuming a reasonable 20 percent margin (which may in fact be too generous), on Books revenues of $317 million for the fourth quarter of 1999, we may assume that the company?s gross profit on books sales was roughly $62 million during the period. But unless marketing and sales costs have suddenly evaporated in the Books segment whereas they equaled roughly 30 percent of sales throughout the entire period when the company sold nothing but books, then marketing and sales outlays attributable to the Books operation alone probably equaled at least $100 million during the period. Advertisement Indeed, even if they equaled only half of that, or a mere $50 million, you?d still be left with only about $10 million to $12 million to cover the allocated portions of the company?s administrative, payroll and product development costs. During the April-June quarter of 1998, those costs alone equaled more than $12 million ? and this was during a time when books were the company?s only business. What?s more, none of these outlays include the allocated portion of the costs for running the company?s hugely expensive warehouse network, which didn?t even exist a year ago. As the company?s press release discloses, those costs are contained in Marketing & Sales, and since books account for half the company?s revenues, it seems reasonable that a hefty percentage of those warehousing costs should also be allocated to the Books operation. More importantly, ?gross margins? are really a misleading concept so far as Amazon.com?s business is concerned anyway since the only revenue that the company can fairly count as its own is the markup on whatever merchandise it acquires at wholesale, then resells at retail. It is from that money ? the gross profit of the business ? that Amazon.com must pay virtually every business expense that it has. At the moment, the company?s gross profit doesn?t even cover its fulfillment expenses to ship its merchandise out the door to customers. According to the company, those costs were 16 percent of sales in the fourth quarter of 1999, which is to say $108 million, or $20.4 million more than the company?s entire gross margin profit of $87.8 million during the period. Bulls on Amazon fundamentals just keep on buying LOL.