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

To: H James Morris who wrote (33851)	1/9/1999 5:51:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

>>AMZN is not, but crowds are.<< This is true. Ps Have you noticed how crowded it's getting here? The number of new names is amazing. I wonder if that means something?? It may. Glenn

To: H James Morris who wrote (33851)	1/9/1999 7:46:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 6 original deal (by our count something like $30 million is left unearned) and extends and enlarges the deal by upward to $50-$75 million. Yup, a brutally efficient economic decision, just like the AOL we know and love. We'll still be keeping one eye, however, on how each of the portal players (Yahoo!, Excite, and the like) executes against our neutrality belief, but for now it seems AOL remains solidly in our camp. 1999: Traditional Retailers Get Serious One of our predictions for the Internet space in 1999 is that, like the traditional media companies (well, Disney and NBC anyway) started to take the Internet seriously in 1998, traditional retailing concerns will start to aggressively embrace the Internet as a new distribution and customer acquisition channel. To this end, we were heartened to see that both Home Depot and Lowe's, the #1 and #2 hardware and tools retailer, are taking their first baby steps toward the Internet. Both companies have a target of mid-1999 for some type of roll-out of their wares on the Internet and, by all indications, both are taking it seriously. Jeff Cohen, who heads direct marketing at Home Depot, suggests as much in last Monday's WSJ: "We know we have to be there, we know we have to be testing." Of course, companies like Superbuild.com and Toolsonline have already recognized the potential benefits of online retailing in the hardware space (as have, we're sure, scores of others), so Home Depot and Lowe's won't be alone in their efforts and should not underestimate either the skills necessary for their online success nor the speed necessary to preclude these and other start-ups from taking a firm grasp of their market share as it moves (inevitably) online. Imagine how much Barnes & Noble would give now to have had just a 6 month head start on Amazon when they started 3+ years ago. From where we sit, we anticipate that many of the traditional brick and mortar retailers will take a cautious stance toward the Internet, learning the lesson from Borders, Barnes & Noble, etc. that this channel takes an entirely new skill set and operating philosophy (unremarkably, just like the traditional media companies are learning first hand now (see “Whoa Nellie” under Observations below). For this reason, we tend to believe that the Wal-Marts, Sears, and Home Depots of the world may start to aggressively pick off niche Web retailers via M&A activity, instead of spending the money to acquire the hard won skills and knee scrapes that these start-ups have earned. Waiting until after the results come in from what everyone agrees was a great Q4 makes a lot of sense to us; traditional media concerns not only can better target those niche Web retailer markets which have matured and come into their own in December, but they can also see how the December quarter has separated the wheat from the chaff; the last thing Wal-Mart wants to do is go cherry picking and end up with sour grapes. That said, we'd also anticipate that, just like Disney's and NBC's forays onto the Internet (with their investments in both Infoseek and Snap!) caused a smart advance in the Internet/new media players like Yahoo!, AOL, Excite and the rest, it's likely that, once the large retailers enter the market and “legitimize” (we're aware that much of that has already happened) the Web as a retailing medium, the retailing stocks could, yet agian, gap upward. The first half of 1999 should prove to be an awfully fun time in this space. Value Chain Re-organization: Retail Brokers Regular readers of The Internet Capitalist will recognize what has now become a recurring part of these pages: our discussion of how the

To: H James Morris who wrote (33851)	1/9/1999 7:54:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 17 The Internet Capitalist Manifesto Why “Capitalist”? The Internet is interesting and hip. It's also popular and cool. Unfortunately, recognition of these facts wouldn't have necessarily made you much money over the last few years. Indeed, an investment strategy based on these gleanings would have left you with a portfolio of Java, VRML, and “push” technology vendors. And though each of these might have created shareholder value on the margin, none would have compensated you for the risk inherent in Internet investing or for the opportunity cost of not being more fully invested in profitable Internet themes. Our goal, then, with “The Internet Capitalist” is to identify and profit from the dislocations that the Internet has created for businesses and consumers alike. We start by asking three basic questions: Which companies have identified the revenue opportunities created by the Internet's growth as a consumer and business medium? Which have the skill sets and management breadth to execute against these opportunities? and Which have business models that will create substantial shareholder value over time? Our answers to these questions should help you capture the arc of our thinking in this industry as it evolves from a network for academics into a medium for the masses. Why “Companion”? We hope this piece asks as many questions as it answers, and generates as much debate as it satisfies (which we plan to include). Coupled with a user friendly layout, we want “The Internet Capitalist“ to stimulate and ease the investment decision. The mental framework with which we parse Internet investments is defined broadly and driven by a few relatively simple themes. Within this framework, however, there are multiple paths to generating superior, above-market returns. “The Internet Capitalist” is our attempt to illustrate those paths on an ongoing basis, determine the commonality among them, and suggest how shareholder value will be impacted and where it will flow. And though you'll find us to be bullish on the Internet sector generally, our expectations for these stocks are tempered by three realities. First, that the market remains relatively inefficient for these securities, which makes taking a substantial ownership position both difficult and costly. Second, valuation levels leave little to no room for errors of execution or strategy. Third, profits (or cash flow) matter; progress toward meaningful profitability is a necessary condition for an increase in shareholder value. With those caveats, we still believe investors can achieve superior returns based on a patient, disciplined, long term strategy toward investing in this sector. We hope “The Internet Capitalist” becomes an indispensable tool toward that end.