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

To: Glenn D. Rudolph who wrote (105281)	6/23/2000 1:34:00 PM
From: H James Morris	Respond to of 164684

>I am sure he will still get more Glenn, I could never figure out who bought those convertible junk bonds, other than Billy Harmond. Btw I'll bet you the new economy boys haven't brought up the Amzn word today. >NEW YORK, (Reuters) - Lehman Brothers Inc. urged in a report dated Thursday that investors ``avoid'' the convertible bonds of Amazon.com (AMZN.O), the world's leading Internet retailer, citing what it called the company's high debt, negative cash flow and poor working capital management. ``Going into what is arguably its most challenging holiday season, we believe that the combination of negative cash flow, poor working capital management, and high debt load in a hyper competitive environment will put the company under extremely high risk,'' Lehman said. ``From a bond perspective, we find the credit extremely weak and deteriorating,'' Lehman added. Lehman's report was dated the same day as a report on the Seattle-based retailer of books, music, entertainment and home improvement products from influential Internet analyst Mary Meeker of Morgan Stanley, Dean Witter & Co. Morgan Stanley said Meeker sees potential for ``no upside'' and ``modest downside'' to her second- and third-quarter revenue estimates for Amazon.com, and sees no catalysts for the stock ''until they make or break the December quarter.'' On trading volume of more than 23 million shares, Amazon.com's stock traded just before midday Friday on Nasdaq at 33, down 9 from its 52-week closing low of 42 set on Thursday. Its 52-week closing high is 106-11/16, set last December 10. SLOW EVOLUTION Lehman said Amazon is evolving fitfully from being a ''virtual'' business to being a more conventional, ``real world'' retailer. ``Amazon.com, as one of the e-commerce pioneers, has one of the best-established brands'' in the business-to-consumer space, Lehman said, but ``has been unable to turn that brand value into what we believe is the most important value of a brand -- turning a cash flow profit per unit of product sold.'' From 1997 to the latest quarter, Lehman said, Amazon.com has received $2.8 billion in funding, and netted revenues of $2.9 billion. That's ``a whopping $0.95 for every dollar of merchandise sold,'' Lehman said. For Amazon.com ``to continue its operations and grow,'' Lehman said, the company must either generate sufficient operating cash flow, or keep raising capital until its operating cash flow turns positive. Lehman said it ``does not anticipate'' Amazon.com to default on any interest payments, at least through the next three payments. Yet it said that in a best-case scenario, Amazon.com's current cash balances will run out by the end of the first quarter of 2001. AMAZON.COM'S CONVERTIBLE BONDS In January 1999, Amazon.com sold $1.25 billion of 4.75 percent convertible bonds maturing in 2009. In February 2000, it sold 690 million euros (then about $681 million) of 6.875 percent convertible bonds maturing in 2010. The stock is now worth less than half of the conversion price. On Wednesday, Lehman said, the 4.75 percent bonds were quoted at $75.035 with an 8.97 percent yield to maturity. The 6.875 percent bonds were quoted at 74 euros with a yield to maturity of 11.38 percent. Standard & Poor's rates Amazon.com's convertible bonds CCC-plus, considered a low junk grade and its seventh highest. Moody's Investors Service rates them Caa3, roughly two notches lower. 11:54 06-23-00