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

To: Sarmad Y. Hermiz who wrote (42782)	2/26/1999 12:36:00 PM
From: neverenough	Read Replies (1) \| Respond to of 164684

Amazon.com - The e-tailing giant gets even bigger with its next product category… Drugs. This week Amazon.com announced a 46% investment in e-tailing start-up Drugstore.com. We expect this news and the increased likelihood of additional investments in emerging e-tailing category killers will serve as catalysts for share appreciation. Amazon is progressing very rapidly in its quest to establish itself as the dominant e-tail portal with multiple revenue streams addressing a vast array of huge consumer market segments. Accordingly, we have recently raised our investment rating on Amazon.com to Strong Buy from Buy. Not only has Amazon's Drugstore.com investment satisfied our thirst for a new product category, but it signals the company's increasingly dominant presence on the Web and ability to leverage its brand, reach, and strong balance sheet to attract the Internet's next wave of e-tailers. We believe that in certain e-tailing product categories, other companies will have the advantage of being the first brand and first mover in the space, but still need Amazon for its ability to instantly provide a large loyal and active customer base comfortable with on-line shopping. We expect Drugstore.com, which just launched its site on Thursday, should grow rapidly, aided by its Amazon relationship, which includes being featured on the Amazon home page. While payment terms were not disclosed, we expect Amazon to receive revenues for each lead its Web site provides to Drugstore.com. We believe the announcement points to a big opportunity for Amazon to generate lead-fee revenues and shows the potential profitability of Amazon's business model. Of course our speculation now shifts to what other investments in e-tailing startups Amazon could announce next. Amazon's stock, combined with its current cash position which has ballooned to over $1.5 billion following a recent $1.25 billion convertible offering, affords the company considerable freedom to make strategic investments. We consider the large and “Internet appropriate” real estate, like RealSelect, and travel markets, like Preview Travel, particularly compelling for the company. SERVICE WITH A SMILE - We believe many e-tailers are opening the window of opportunity for their competitors by not focusing on best practices of physical world retailers, in particular customer service. A recent study by BizRate.com found an 83% customer satisfaction rating of customer service on e-tailing sites. A similar survey by Jupiter Communications found that the proportion of dissatisfied on-line shoppers is growing. Specifically, over 2,300 households with Internet connections that were initially surveyed in June 1998 were asked about their current satisfaction levels. 74% of those surveyed felt satisfied, 14% below the proportion reported after the initial survey. We question whether companies earning this level of satisfaction are likely to retain their customers. Our hunch is that this metric must go up for e-tailing's winners. In our opinion, the companies that will succeed and perform the best for investors will be those e-tailers that offer the added conveniences of on-line shopping as well as superior shopping experiences to their physical world counterparts. Outsourcing the customer service function certainly makes it more difficult for companies to set and achieve the highest standards. We believe Amazon.com's brand, fulfillment capabilities, and exceptional customer service distinguish it as “best of breed” both relative to e-tailers and retailers. REGISTER NOW: To automatically receive the Weekly Web Report via e-mail, please register at internetstocks.com.