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

To: Bolder who wrote (10994)	7/21/1998 10:02:00 AM
From: Tom D	Read Replies (2) \| Respond to of 164684

I don't think there was such an article, at least on the web version. Check for yourself. search.nytimes.com Tom D

To: Bolder who wrote (10994)	7/21/1998 11:45:00 AM
From: Rob S.	Read Replies (1) \| Respond to of 164684

Those of us who have been shaking our heads at the high valuation Amazon.com has reached over the past couple of months have a hard time figuring why the stock doesn't collapse based on the fundamentals and reasonable expectations for sales and earnings. Let's face it, the swelling tide that is lifting the internet camp shows no immediate signs of abating. Why is that? I think the basic, obvious answer to that question is that Internet commerce is destined to become a large part of worl-wide commerce; by various estimates between $70 and $300 billion within just a couple of years and reaching to about 1/3 of all transactions within 10 to 15 years. That's huge by any measure and puts a glimmer in the eyes of every class of investor from Bill Gates down to the guy delivering pizzas. These statistics and the knowledge of the inherent efficiencies of the internet have been for a while. So why is it now having such an impact on these stocks to the point that they are racing to the upside? I think that there is now enough tangible evidence that even the average seven figure wall street analyst can understand the significance of e-commerce to some degree (snicker)- enough to tout it over hill and dale. And the media/ad empire that stands to loose the most from the shift away from traditional broadcast media are pumped with adrenalin maybe partly out of fear that if they don't "get with it" that they will be out of a job in the near future. Lot's of motivation and anguish surrounds this issue because it changes the root way commerce is negotiated and carried out. Now this "new reality" is still sinking into world consciousness - more people are yet to catch on and more money is yet to be entranced into dumping in on already pumped stocks. The basic problem with the high valuations in the internet darling stocks is two-fold; 1] The "darlings" such as Yahoo! and Amazon, are the first ones to catch the attention of investors. These companies have done a great job in promoting themselves and creating some of the early buzzwords that people can cling to. Amazon.com sells an "everyday" commodity product that is easy to identify with. For all the criticism with their numbers and prospects, they do ahve a well oiled web site and some healthy sales momentum; enough to make speculation easier to swallow. So as new investors become aware of the prospects for e-commerce, a realization that is rolling through every business and houshold in Amaerican and much of the world, a portion gets directed toward Amazon.com regardless of any fundamentals or competitive factors. Call this the "recognition factor". 2] Then there is the failure of even most analysts to understand the nature of the internet fully. Analysts are still in the early learnging stages with little practical experience to go on. They have not seen the build-ups followed by let-downs and salesman-like company presentations followed by more realistic market assessments. Analysts now have their heads deep into the mystical period of sharp, almost unfettered period of market expansion. The main barriers for Amazon.com and other e-tailers is still costricted by the main barriers to the internet as a whole - how fast it expands and bandwidth is made available at reasonable cost. If the overall market increases by leaps and bounds and you are one of the leaders in the field, then your prospects for increased sales will continue to look good. Competition during this phase is not threatening. Grooowth . . . ohmmmm . . . OK, analysts are groking the growth part of the equation with fair tolerance but where are they mis-leading the public and themselves? Our body of experience with communications technologies is based on the broadcast media. Broadcast has become a pervasive part of most people's lives over the past 75 years. It is so engrained with how find information and make decisions that it's hard for many to see the internet differently. Rather, it is seen more as an extension of TV and other broadcast media. Another large factor is that the trillion dollar worldwide media/broadcast empire has a vested interest in trying to meld the internet similarly to TV and radio. Otherwise a lot of bucks drop through their hands. Examples of that influence, (or failures of it), are the MSNBC money sink-whole, the Netscape and MS attempts at embeding "channel technology" in their i-explorers, and the growing awareness among thsoe studying internet ad usage that people often do their best to ignore i-ads and to deviate "funneling" through information at portal sites. The short of it is that analysts views of how the internet will shape e-commerce are warped by the expectation that users can be channeled or lured by ads to prefer limited numbers of points of reference - portal sites. Another defect in the view of many analysts is the degree with which the internet enables competition and comparative shopping. It's easy for analysts eyes to gloss over at the grand plans Amazon, Yahoo! and other inet companies CEO's and CFO's can lay out for them. The plans for brining out exciting new technologies to enhance the web experience, analyse buyers preferences and brousing habits, and stear the web interaction creatively go well beyound the capabilities of traditional advertising and promotion methods. Ya got that right pardner. What most analysts fail to get right on this factor is that a very active and vibrant software developer industry is quickly providing very cabable tools to do the same things that Amazon.com created from scratch and much more. In fact, many of the capabilities will reamin bogged down because of the slowness of the web rather than by the ability to develop back-office database, analysis, and server systems to support them. Such things as real-time DVD quality streaming audio and video, 3-D web graphics and navigation, and others are just limited curiosities at this point in the web's practical evolution. Another trend in internet technology development is the ability to share user information to provide a convenience to users and a practical way for providers to get at demographic and preference information. Many Analysts see the work that Amazon.com and others have done in gathering information on their users and think of this as a vast resource that will be the pot of gold for future exploitation. It certainly has value, but not as much as they think. W3C (the world-wide non-profit internet authority) committies have aleady worked out draft standards called OPS or Open Profiling Standard that allows users to enter their demographic and prefernce information once and then share it as they see fit with the sites that they visit. Visitied sites can ask the user to adend or amend the information. Of course individual sites will remain in control of their site logs and user databases for analysis of navigation and purchasing history. The point is that the advantage of early repositories of user information will dwindle over time as universal standards and tools become adopted. Amazon's business model theory that heavy investment now to gain brand recognition and user profile information with which to do push advertising and promotion is still on target but is not going to have the proprietary pay-out that many analysts imagine. The summary of the second point is that internet tools are quickly becoming more pervasive, easier to implement and cheaper than has been Amazon's "grow your own" experience. As quickly as Amazon.com attempts to errect barriers to competition, the highly active developer community is creating usefull and creative tools and services to surpass them. Ask yourself this; Is it easier today fro a Barnes and Noble or a small chain book store or other retailer to enter the market today than it was a year ago? Will it be easier to gain access to user information and enter into competition two years from now? The huge perceived advantage of Amazon.com in fending off competition does not exist. I don't expect the madening rush of money into internet stocks to end completely any time soon. The rush to awareness of the huge impacts the internet will have on commerce is still spreading out and is motivated by many personal and commercial factors. Just like the tulip bulb, e-commerce has some substance behind it that can be seen and touched. But that analogy is not complete in explaining the phenomena. The internet is being far more instrumental to practical commerce and human interaction than any flower, no matter how lovely and fragrant. There is enough true causality, turmoil, fear and lust behind the internet phenomena to propel the overall group for a while. However, Amazon.com has had money thrown at it all out of proportion to reasonable prospects governed by logistic and competitive realities. The assessment of the ease with which competition will enter the market and price pressure will hold down margins to low levels has been grossly under estimated and fueled by self serving pundits and financial interests.