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

To: craig crawford who wrote (16971)	9/12/1998 4:30:00 AM
From: Bill Harmond	Read Replies (4) \| Respond to of 164684

>>If AMZN loses $50 million to achieve 2.5% market share, will they lose $150 million to get to 7.5%? Probably far more than that. America Online lost $10 billion to net its first 10 million members. As Amazon has scaled up, operating losses as a percentage of sales have consistently declined. Amazon's sales and marketing expenses (23% of sales) compare, for example, to CDNow (77%) or N2K (107%). That statistic showing Amazon losing $8 on every sale is misleading. It falsely implies that Amazon isn't progressively achieving advantages of scale. >>comment on the Microsoft/Amazon comparisons. If I'm not mistaken Microsoft was profitable when it came public in 1986 and had a market cap of around $519 million If the Street knew then what we know now about client/server computing, Microsoft would have carried Amazon's valuation. Wall Street has wised up since the Microsoft and Cisco IPO's because of valuable hindsight. When Microsoft came public in 1986 the PC was a primitive, mostly stand-alone device. Few were interconnected, and then mostly locally. I subscribed to CompuServe in 1984 over a 300 baud modem with no graphics, and the command system required reference binders. You virtually had to be a programmer (which I'm not) to use it. Microsoft didn't start benefiting from increasing returns until Windows 3.0, and the reinforcement of Windows by a growing developer base. Nobody knew about Windows in 1986. Internetworking didn't really reach critical mass until 1992 or 1993, but it benefited by being a backfill opportunity into the substantial existing installed base of PC's so it grew faster than the base of PC's did. From that was born client/server computing, and the corporate productivity-payoff began. Companies accelerated their deployment of PC's, and the enterprise software business grew up, which grew at a faster rate than internetworking because it was a backfill opportunity into the base of internetworked PC's. Same with the Internet. It grew faster still because the installed potential user base had grown to immense proportions, something like 100+ million installed PC's by 1994. It's all the concept of backfill. Each new development benefiting from large (and still rapidly-growing) existing technology deployments on which it builds. Now along comes e-commerce. By now Wall Street "get's it," and it willing to (actually the Street competes to) pay up for the opportunities that have the clearest prospects. Immediate operating results take a back seat to the end game. Capital is plentiful and the computing platform is stable and defined, so the focus moves to things like market opportunity, branding, top-line growth and market share. From these signposts the Street is willing to bet further into the future than they have before. First movers have an obvious advantage, and the category leaders benefit from the lowest-cost capital (usually their own stock), and, if they don't stumble, they just get stronger and more dominant.

To: craig crawford who wrote (16971)	9/12/1998 8:57:00 AM
From: llamaphlegm	Read Replies (1) \| Respond to of 164684

Craig writes: <<<If AMZN loses $50 million to achieve 2.5% market share, will they lose $150 million to get to 7.5%?>>> Of course not, Craig and stop being so easy on the bulls. AMZN lost $50mm with no competition. Bezos tells us himself that the competition is now fiercer, that he does NOT expect marketing expenses to decrease (ie they will have to wratchet up probably), and the marginal cost of attracting that incremental user and RETAINING her/him goes up accordingly. LP