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Non-Tech : Image Entertainment (DISK) -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (155)	7/19/1998 7:40:00 PM
From: William T. Katz	Read Replies (1) \| Respond to of 379

Very pertinent clip of an article from NY Times on Amazon: Sonkin does not own Amazon because, at $119.8125 a share, the current valuations scare him, but he has become a recent convert to the Amazon game plan after hearing Joy Covey, Amazon's chief financial officer, and other Amazon executives make their case last month at a conference at BT Alex Brown in New York. Like Dell Computer and other direct sellers, Amazon enjoys some advantages over traditional retailers. The most obvious is minimal inventory. Retailers like Wal-Mart have been shaving inventory levels for years, but Amazon has carried the idea further. Though it recently added a second warehouse, it still carries in inventory only a small fraction of the books it sells. Most titles are not ordered from the distributor until a customer has placed an order. So Amazon turns over its inventory about 26 times a year, 10 times as fast as Barnes & Noble, and avoids immense carrying costs. But behind the spare inventory is an advantage that excites Sonkin and other analysts: a negative operating cycle. Most retailers -- most businesses, in fact -- must buy goods and supplies before selling them. Cash goes out to suppliers before it can come in from customers, obliging the company to continually finance the gap, often equal to a month or two's worth of sales. Not Amazon. It charges a customer's credit card account as soon as it ships a book, and the credit card company usually pays Amazon within a day. Amazon, meanwhile, takes an average of 46 days to pay its suppliers, the book distributors. Instead of having to pay to finance sales, Amazon profits from having the use of its customers' money for a month and a half. And Amazon plans to stretch that float even longer as it uses its growing buying power to repay publishers even more slowly, Ms. Covey said in an interview. If you read this clip from the NY Times, you can understand how DISK might be positioned to really benefit from the explosion in e-commerce. Here is a distributor of optical video goods, the decaying laserdisc and the ramping-up DVD. They will have a fully automated distribution warehouse next to a major airport up by September. And they have publically announced their intention to do direct internet sales. If you are an e-tailer like Amazon.com, why wouldn't you simply use Image Entertainment and electronically wire your orders to them for handling (also automated on Image Entertainment end)? This is especially true for items like laserdiscs where its a niche market that is contracting ... why hold any more inventory than absolutely necessary? These are the facts we should be concentrating on and trying to be putting a value on.