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

To: Glenn D. Rudolph who wrote (45401)	3/12/1999 9:23:00 AM
From: Frost Byte	Respond to of 164684

From Robertson Stephens this morning: Amazon's Newest Premiere Partner - Amazon's announcement of a strategic agreement with Dell Computer is yet another example of the e-tailer's burgeoning portal status and could signal the company's next product category. Currently, Amazon's checkout page features links to both Dell and Drugstore.com, for which we believe it will receive lead fees. Dell also features a link to Amazon. We would not be surprised to hear future announcements with other PC companies to build out a PC store. In our opinion, Amazon is the ideal e-tailing partner on the Web today and is quickly establishing itself as the first franchise e-tail portal. Dell potentially offers Amazon a quick and easy entry into a new product category. We believe that in order for Amazon to remain a best-of-breed e-tailer, the company must partner with only the most recognized and highly regarded brands. In addition, we continue to believe that software will be one of the next product categories for the company and would not be surprised if it partnered with Digital River as its outsourcing agent. Amazon – Growing into its Valuation - We believe that Amazon's recent investment in Drugstore.com and linking agreement with Dell Computer is pointing to an evolving business model, which demonstrates how the company is growing into its valuation. When we consider Amazon's current 6.2 million customers spent on average $98 in 1998, it is not hard for us to imagine, by our estimates, that 15.7 million customers will spend $135 each in the year 2002, leading to roughly $2.1 billion in revenues. Given Amazon's magnetic brand and the growing allure of Web shopping, we would not be surprised if average spending doubles or even triples by that time. This model reflects Amazon's impressive e-tail business, but not yet its expanding rental revenues. According to the company's recently filed 10-K, customer acquisition costs declined in 1998 as advertising expense decreased from 14.3% of 1997 sales to 9.9% of 1998 sales and other marketing expenses declined from 13% to 11.9%. We believe the combination of revenue growth, margin improvement from lead-fees, and lower customer acquisition costs point to long-term profitability. In the near term, we expect more deals to provide stock catalysts. Based on these factors and our sense that the current pace of business remains strong, we rate share of Amazon.com a Strong Buy.