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

To: llamaphlegm who wrote (11778)	7/25/1998 11:42:00 PM
From: llamaphlegm	Respond to of 164684

More evidence, as if that were needed, that you need not be intelligent to be a publisher. I know that Glenn or someone posted this here when it came out, but a quickie reminder of the frailty of some minds. The Wall Street Journal Interactive Edition -- July 14, 1998 Commentary The Web Is Recession-Proof By RICH KARLGAARD Just consider: Yahoo ($8.2 billion market capitalization) is worth more than the New York Times Co. ($7.6 billion) Amazon.com ($6.2 billion) is worth more than Barnes & Noble ($3 billion) and Borders ($2.9 billion) combined. America Online ($26 billion) is worth about as much as ABC, CBS and NBC combined. A wag on the Internet wrote last week that traders had to be "free-basing St. John's Wort" to bid up these stocks so high. Are silicon and fiber really the stuff of alchemy? So it appears. They take gossamer wings of thought and brand power and speed and turn them into equity billions. At the same time they transform many old bankable assets, like real estate and storefronts and inventory, into "legacy problems"--albatrosses of land and concrete and steel. Two weeks ago the on-line bookseller Amazon.com, a pure Internet play, loomed like a fat Cheshire cat sitting on the scale of market value, outweighing Barnes & Noble and Borders combined. Mere months ago, Barnes & Noble and Borders were seen as mighty powerhouses--so mighty, in fact, that independent booksellers across America were begging the U.S. government to break them up. But that was long ago and far away on the Internet time horizon. The idea for Amazon came floating out of a young hedge-fund trader's brain in a blink. Quickly, Jeff Bezos turned those big bookstore powerhouse assets into anchors of lead and dross. Or so argued the stock market last week when it bid up Mr. Bezos's version of a bookseller. What really is going on? Are we hearing the trumpets and heralds of the grandly anticipated New Economy? Or is it the carnival bark of a stock-market sucker bet? At the risk of sounding wishy-washy, the answer is resoundingly: both. Yes, Amazon and Yahoo and the like are laughably overvalued. But, yes, Amazon and Yahoo are bullet-proof evidence that we live in a New Economy. Try this thought experiment: Suppose the Dow Jones Industrial Average fell to 5000 and stayed there, supine and sick with Asian flu, for several years. Then what? We'd all feel poorer. But would Amazon's satisfied book buyers suddenly feel an urge to jump back into their cars and drive to stores? Think about what a 5000 Dow might bring. Should it last, then cars will be crummy and old because, remember, we'll be poor, or think we are. We'll lack the confidence to trade up. But thanks to Moore's Law and the digital bandwidth tornado, our home computer will be cheaper, yet faster, and Web pages will snap to life in brilliant colors via very affordable cable modems. (OK, maybe Moore's Law, which describes the interval between doubling chip speeds, will slow from 18 months to 24 months with fewer chip factories going up. Maybe the digital bandwidth tornado will calm down from its thousandfold annual growth rate to just half of that. Even so, we are still talking about exponential growth curves.) All this sounds good for Amazon, not Barnes & Noble. In a prolonged 5000 Dow recession, bookstores may go without new carpeting. Store clerks will dress more shabbily than they do when the Dow is at 9000. Customers, already irritated from their drive in an jalopy, might arrive at the store and find they have to step over bums or wedge past angry clerks shouting union slogans. Or have you forgotten what bad times feel like? Don't let this summer's high stock prices make you cynical about the Internet economy. It's real and revolutionary--whether the Dow is at 10000 or 5000. Mr. Karlgaard is publisher of Forbes.