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

To: saber hormi who wrote (2455)	3/25/1998 3:27:00 PM
From: Candle stick	Read Replies (2) \| Respond to of 164684

From todays, "thestreet.com"...... Herb on TheStreet: Oh, No, Not the Bear Story on Amazon Again! By Herb Greenberg Senior Columnist 3/25/98 9:33 AM ET It's a jungle out there: Amazon.com (AMZN:Nasdaq) continues to confound the skeptics with valuations that one bewildered bear growls are simply "beyond comprehension." A $2 billion market cap compared with $2.6 billion for Barnes & Noble (BKS:NYSE). A price-to-sales ratio of 120 compared with a little more than 1 time sales for B&N. Oh, and Amazon still isn't making any money, but neither are most Internet companies, so we'll just take that as a given. Why dredge up this tired old story, again? You can pretty much blame it on Bertelsmann's $1.4 billion bid for Random House, which comes just a few weeks after the German media giant announced plans to start an Amazon look-alike called BooksOnline. What's more, Cendant (CD:NYSE) is quietly putting the final touches on its Books.com site, which requires a membership but promises to automatically price every book below Amazon (or anybody else, for that matter). And B&N is committing more money to its online division. Therein lies the reason the Amazon bears have come out of hibernation. With competition growing more intense, and Books.com claiming it'll always have the lowest prices, Amazon's business model suddenly looks more vulnerable than ever. Gross margins tend to fall when competition goes up and prices go down. Yet Morgan Stanley Dean Witter forecasts that Amazon will earn 10 cents per share next year, 73 cents in 2000 and $1.42 in 2001 based on gross margins of 23%, 24% and 25%, respectively, up from 19% today. What about the competition? What about the pricing? Why should you think margins will rise? "If you had told people when we went public that we'd do $148 mil in revenues, which is nine times Barnes & Noble's online operation in the fourth quarter, they would have questioned what we were saying," an Amazon spokesman says. He adds that Amazon is hoping that its brand, its culture, its current customer base "and our understanding of purchasing patterns is a competitive advantage." What about the possibility of pricing pressure? The spokesman says it isn't clear whether prices will drive demand in the online book world, or whether Books.com's membership strategy is something online book buyers want. And even if they do, "Cendant doesn't have a patent on the book membership model," he says. Then there's the good ole bricks-and-mortar argument. Amazon doesn't have much in the way of traditional overhead, so despite its losses it's already cash flow-positive from operations. And it turns its inventory so quickly that it likes to think of itself as the Dell (DELL:Nasdaq) of the bookselling world, while everybody else is like Compaq (CPQ:NYSE). Maybe so, but these are still the early days of the Internet, and with valuations like Amazon's, one disappointment with those margins and those bears could start to look a lot more like piranhas.