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To: jbn3 who wrote (227)	3/28/1999 10:43:00 AM
From: Chuzzlewit	Respond to of 419

Good morning Bachman, You asked Query: will not the 'elimination of the expense associated with a physical presence', which potentially allows e-tailing to be so profitable, also greatly reduce the start-up costs of competitive ventures? Yes, and that is one of the subtexts of part 2 of my rambling ruminations on e-tail. Stay tuned. TTFN, CTC

To: jbn3 who wrote (227)	3/29/1999 3:05:00 PM
From: Chuzzlewit	Read Replies (3) \| Respond to of 419

Good afternoon Bachman, I have just completed a statistical analysis of AMZN and have discovered something truly astounding. Over the past three years (this is the limited data set I used) the costs behave as if they are all variable (i. e. no fixed component)! Using simple linear regression I get the following coefficients which were the result of a trend-line forced through a 0 intercept because the true intercept would have been negative: Marketing and sales expense = 22.2% of sales Product development = 7.8% of sales G & A = 2.8% Therefore, on an EBITDA basis, overhead costs total 32.8%, and Cost of sales totals 78.1% 110.9% of sales. This implies, of course, that breakeven is impossible, and that losses will widen with increasing sales. But even if we make the simplifying assumption that 50% of overhead cash costs are fixed ($97,815), the variable portion is 16%, and total variable costs would be 94.1%. The implication is that sales would need to rise to $3,315.7MM just to break-even. If the company were able to shave 10% off of its cost of sales it would still need to more than double its sales just to break even. How does an analyst put out a buy rating on this stock? TTFN, CTC