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

To: Glenn D. Rudolph who wrote (101858)	4/21/2000 12:34:00 PM
From: H James Morris	Read Replies (1) \| Respond to of 164684

Lets talk about this article for a minute. I didn't know Amzn made a profit in shipping! >First, though, we will digress to reveal that Amazon has a surprise profit center: shipping! Last year Amazon's customers paid it $239 million for shipping, against which it incurred costs of $227 million. So profit was $12 million (which was actually down, because of a Christmas logistics problem, from the $18 million earned on shipping in 1998). There's still another point about that $239 million in shipping revenues: They're included in Amazon's total revenues of $1.6 billion, and in fact make up 15% of the total. That's a large proportion, especially considering the market's practice of often pricing Internet stocks--none too rationally--off their revenues. I know we talked several times about the float advantage. >There is, meanwhile, a wonderful facet of Amazon's business model that allows it to generate cash, or more precisely, "float." Picture a customer's purchase of a book. The customer pays Amazon with, say, an American Express credit card; Amazon collects the sale price (minus a fee) within a few days from American Express; and in time Amazon pays its supplier, which will ordinarily be a publisher or a book wholesaler. In the weeks that pass before the supplier is paid, Amazon has the use of the customer's money. To see how important this float can be, we need only to look at Amazon's financial profile at the end of 1999. The company consistently has accounts receivable so small that they don't even get itemized on the balance sheet. But it carries huge accounts payable. At year-end, these were $463 million. In other words, that much money was owed to suppliers. But for the moment, it was in Amazon's hands and being used profitably--to fund inventories, say, or cover the payroll, or buy Treasury bills. Yes, eventually the company must pay suppliers. But as it does, it is also generating new sales and building up a new supply of float. In short, Amazon has a business model that continually generates a golden stream of cash.

To: Glenn D. Rudolph who wrote (101858)	4/21/2000 12:49:00 PM
From: H James Morris	Read Replies (1) \| Respond to of 164684

>At year-end, these were $463 million. In other words, that much money was owed to suppliers. Glenn, Now you understand why Amzn's suppliers feel getting paid from Amzn...is like pulling teeth. Btw Don't believe the float is invested in treasury bills...I'll bet you the float is invested in Kleiner deals.