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

To: Sarmad Y. Hermiz who wrote (48053)	3/30/1999 7:28:00 AM
From: MoonBrother	Respond to of 164684

This Just In! Couple more latest analysts' comments! Enjoy the day! -------------------------------------------------------------------- 06:51am EST 30-Mar-99 Bear Stearns (Ehrens, S/ Esh, M 212/272-9382) AMZN EBAY AMZN: Amazon Enters the Online Auction Fray Scott Ehrens (212) 272-9382 sehrens@bear.com 3/30/99 Matthew Esh (212) 272-9043 mesh@bear.com Matthew Adams (212) 272-6905 madams@bear.com Subject: Company Update Industry: Internet / New Media BEAR, STEARNS & CO. INC. Amazon.com, Inc.* (AMZN- $149) - Buy Amazon Enters the Online Auction Fray; Acquires a Record 1.8 Million Customers; Bought 50 Percent Stake in Pets.com _________________________________________________________________ * Amazon.com Enters the Online Auction Fray. Amazon.com announced that today (Tuesday) it will launch its online auction site, for both consumer-to-consumer and business-to-consumer auctions. The addition of online auction is a way for Amazon.com to rapidly expand the breadth of its product categories, which will offer tens of thousands of products in 800 product categories. Jupiter communications estimates that the business- to-consumer online market will be $3.2 billion in 2002, up from an estimated $460 million in 1998. * Amazon.com Adds 1.8 Million Customers in Q1, a New Record. Amazon.com announced that it has attracted its eight millionth customer, an increase of 1.8 million over its total customer base of 7.2 million at the end of December. In terms of total customers acquired in a quarter, this is a record for Amazon.com. The growth in customers is impressive since the previous record of 1.7 million new customers was in the seasonally strong fourth quarter of 1998. In addition, the growth in new customers is 38% greater than our estimate of 1.3 million, which portends a stronger than expected quarter. * Amazon.com Buys 50 Percent Stake in Pets.com. Amazon.com announced that it has bought a 50% stake in Pets.com, an online seller of pet food, pet toys, and other pet supplies. This announcement comes soon after its February announcement that it had purchased a 46% stake in Drugstore.com, which sells drugs and beauty products on the Internet. We believe Amazon.com will continue to expand its product offerings through both acquisition and building internally. * No Change in Estimates. We are not changing our estimates at this time, but expect to have additional guidance when the company reports earnings in late April. _________________________________________________________________ MARKET CAPITALIZATION $23,102 (MM) EARNINGS Q1 Q2 Q3 Q4 Mar Jun Sep Dec Year P/E Current 1997 $(0.03)A $(0.06)A $(0.07)A $(0.08)A $(0.24)A NM Current 1998 $(0.07)A $(0.12)A $(0.16)A $(0.14)A $(0.50)A NM Current 1999 $(0.27)E $(0.26)E $(0.22)E $(0.19)E $(0.93)E NM Current 2000 $(0.27)E NM _________________________________________________________________ Reasons to Enter the Online Auction Market Expand Product Selection in a Large Market. Amazon.com stated that it has entered the online auction market primarily to offer a wider range of products. Auctions allow for the expansion into hundreds of product categories at once; its prior expansions into music and video were "linear" product additions, in that they added primarily one category. Amazon.com has stated that its online auction will offer tens of thousands of products in 800 product categories. In addition, Jupiter Communications has forecast the business-to-consumer online auction market to reach $3.2 billion in 2002, up from $460 million in 1998. (However, this estimate does not include the consumer-to-consumer online auction market.) Potential to Add Higher Margin Revenue. Consumer-to-consumer online auctions offer the opportunity to generate higher gross margins than from the traditional online retail model. The reason is that the consumer-to-consumer online auction company does not take possession of the goods, but rather charges a fee on each transaction, which greatly reduces the cost of goods sold. For example, Amazon.com generated a gross margin of 21.1% in its latest quarter, while eBay, the largest online consumer-to- consumer auction, had a gross margin of 82.8%. Increase Visit Time and Repeat Purchase Rate. Online auction visitors have desirable characteristics relative to the average Internet shopper. For example, visitors to Ebay spend an average of 23.9 minutes online per month, according to Media Metrix. By comparison, the average Amazon.com visitor spends 6.7 minutes on its site per month. In addition, business-to-consumer auction sites have relatively high repeat purchase rates, with both uBid (68%) and Onsale (77%) posting higher repeat purchase rates than that of Amazon.com (64%). However, we should note that Amazon.com's repeat purchase rate is high relative to other retail sites, such as Cdnow at 59%, barnesandnoble.com at 51%, and Cyberian Outpost at 48%. Comparison of Visitor Characteristics Between Amazon.com and Online Auctions Average Minutes 3Q98 Repeat Company Auction Type Spent per Usage Purchase Month Rate Amazon.com Consumer-to- 6.7 64% consumer; Business-to- consumer Ebay Consumer-to- 23.9 N/A consumer FirstAuct Business-to- 8.8 N/A ion consumer Onsale Business-to- 8.6 77% consumer UBid Business-to- 7.1 68% consumer Source: Media Metrix; Jupiter Communications; Company data What Are Amazon.com's Competitive Strengths in Online Auctions? Large Customer Base. Amazon.com's customer base of 8 million is an enormous advantage in terms of kick-starting its online auction efforts. Amazon.com has demonstrated its ability to ramp sales in new categories when it entered the music and video markets. In addition, at the end of the fourth quarter, Ebay (by far the largest online auction) had 2.1 million members, meaning 2.1 million visitors registered to bid on products, but did not necessarily buy. This is not only much lower than Amazon.com's total customer base, but also shows that the majority of Amazon.com's users do not currently have loyalty to any particular auction site. Trusted Brand Name. According to Jupiter Communications, the second most important factor that would increase the probability of an Internet user to bid in an online auction is greater trust in the site (the first is lower prices). Given Amazon.com's strong brand and ability to get customers comfortable with purchasing online (as seen by its 8 million customers), Amazon.com could have a head start over other sites in this respect. In addition, Amazon.com has stated that it will insure against fraud up to $250 in an attempt to maintain its trusted brand. (Amazon.com will self-insure the transactions, taking on the fraud risk.) Amazon.com's Current Products Translate Well into Auction Market. The fourth, fifth, and six most frequently purchased products via Internet auction (according to Jupiter Communications) are books, music, and videos, all of which are online retail categories in which Amazon.com dominates. (The first, second, and third most popular are PC hardware, software, and collectibles.) Amazon.com potentially has a competitive advantage over other online auctions in these categories if it can leverage its strong market position, strong brand name, and large list of customers into the auction market. Amazon.com Adds a Record 1.8 Million Customers; Now Total 8 Million Amazon.com announced that it has attracted its eight millionth customer, an increase of 1.8 million over its total customer base of 7.2 million at the end of December. In terms of total customers acquired in a quarter, this is a record for Amazon.com. The growth in customers is impressive since the previous record of 1.7 million new customers was in the seasonally strong fourth quarter of 1998. In addition, the growth in new customers is 38% greater than our estimate of 1.3 million, which portends a stronger than expected quarter. Amazon.com Buys 50 Percent Stake in Pets.com Amazon.com announced that it has bought a 50% stake in Pets.com, an online seller of pet food, pet toys, and other pet supplies. This announcement comes soon after its February announcement that it had purchased a 46% stake in Drugstore.com, which sells drugs and beauty products on the Internet. We believe Amazon.com will continue to expand its product offerings through both acquisition and building internally.

To: Sarmad Y. Hermiz who wrote (48053)	3/30/1999 7:28:00 AM
From: MoonBrother	Respond to of 164684

05:39am EST 30-Mar-99 BT Alex. Brown Incorporated (S. Andrikopoulos/J. Pat) AMZ AMZN: Blasting Into On-Line Auctions With A Winning Strateg-Strong Buy-Part 2/2 Andrikopoulos, Shaun G. (415) 477-4234 03/30/1999 Patel, Jeetil J (415) 477-4223 Berger, Lance A (415) 732-3004 BT Alex. Brown Incorporated ------------------------------------------------------------------------------- AMAZON.COM INC. (AMZN) "STRONG BUY" Blasting Into On-Line Auctions With A Winning Strategy--Reiterate "Strong Buy" (1) Investment Rating -Part 2/2 ------------------------------------------------------------------------------- Date: 03/29/1999 EPS: 1998A 2000E Price: 149.63 1Q (0.07)R (0.29) NE 52-Wk Range: 199 - 13 2Q (0.12)R (0.28) NE Ann Dividend:0.0 3Q (0.16) (0.24) NE Ann Div Yld: 0.00% 4Q (0.14) (0.13) NE Mkt Cap (mm):23,103 FY(Dec.) (0.50)A (0.93) (0.60) 3-Yr Growth: 75% FY P/EPS NM NM NM CY EPS (0.50) (0.93) (0.60) Est. Changed No CY P/EPS NM NM NM ------------------------------------------------------------------------------- Company is seizing the opportunity to advertise on TV since none of the other on-line auction sites have launched TV marketing campaigns to date. COMPELLING REVENUE MODEL We believe that the fee-based auction opportunity represents a compelling revenue opportunity. Unlike Yahoo!'s and Excite's ad-supported services, Amazon plans to implement a listing fee- and commission-based business model similar to the way eBay does business. Given the minimal inventory carrying costs and fixed-cost nature of the business model, we feel that Amazon could potentially enjoy gross margins of 80-100% and operating margins of 30%-plus longer term within the on-line auction market. Although the Company will be aggressively ramping up the service, with respect to both products and traffic, we are not changing our revenue or EPS loss assumptions at this time. If, however, we assume that 25% of the Company's 8 million current customers were to buy or sell products at $2.50 per listing or transaction fee, the Company would generate $5 million in incremental revenues by year-end, or $4 million in incremental gross profits (at 80% gross margins). We note that this would not only boost corporate gross margins but also increase the gross profit per average customer. We feel that Amazon.com could potentially achieve operating margins higher than our current 9% forecast longer-term, driven by these higher margin auction revenues. This reinforces one of our core theses that the Company's long term margins will be ultimately driven by higher margin service revenues rather than product revenues. MARCH QUARTER APPEARS STRONG AS EXPECTED Amazon.com also indicated that its customer base is currently around 8 million, versus our 1Q estimate of 8.08 million customers, with a couple of days left in the March quarter. Based on our conservative repeat order rate of 64% and an average order size of $45 (vs. $53 in 4Q), we feel that the Company should be able to exceed our March quarter revenue forecast of $265.0 million. We anticipate that Amazon.com will achieve upside to our 1Q operating loss per share estimate of $0.29. PETS.COM INVESTMENT REPRESENTS PLAY INTO ON-LINE PET RETAILING SPACE Amazon.com also announced today that it plans to take a 50% stake in Pets.com, the largest pet company on the Internet. We note that the pet market, including both products and services, represented a $23 billion opportunity in the U.S. in 1998. Similar to the Drugstore.com investment, Amazon's investment in Pets.com represents a unique yet powerful play into another attractive retailing segment with an off-balance sheet investment strategy for the Company. This reinforces our thesis that Amazon will not only build its way into new product categories but it will also buy its way through minority partnerships. We feel that the investment could eventually be liquidated or even fully consolidated once the service has been fully built out. This minimizes the execution risk for Amazon as it extends its brand permission. The transaction is expected to be completed in early April. RISKS Although we feel that Amazon's execution to-date has been near flawless, we note that the complexity of its business increases geometrically as it adds new business lines (such as auctions) and incremental product categories, expands into new geographies, and expands its world-class product fulfillment infrastructure. Overall, however we think that Amazon is one of the best-suited companies to manage its hyper growth given its deep management team and critical mass. The Company plans to build up a critical mass of product listings based on tens of thousands of products expected at the launch. We note that the largest c2c on-line auction service, eBay, currently offers almost 1.8 million products on its site today, representing a sizable (scale) advantage. CONCLUSION AND RATING -- ANOTHER REASON TO OWN AMAZON We feel that the auction launch establishes yet another reason to own Amazon.com stock for the long term. We continue to believe that Amazon represents a core holding for investors seeking exposure to the rapidly growing Internet retail sector. We are firmly convinced that Amazon.com has the potential to establish a true multi-national brand that will compare with the likes of Coke, Sony, or The Gap. We reiterate our "Strong Buy" investment rating on shares of Amazon.com.

To: Sarmad Y. Hermiz who wrote (48053)	3/30/1999 7:31:00 AM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

CATCH OF THE DAY: Dinosaur 4 sale, make offer Like a tree that keeps sending out leaves even though the roots are dead, the fate of the print classified advertising business is sealed. It's all over. Online auctions are a far more efficient way to resell consumer goods. The next iteration of the online auction business is the adoption of person-to-person auctions on special-interest sites. While eBay has an active trading community, local newspapers and topic-specific sites could really do a service to their communities by enabling flexible-price person-to-person commerce. Unfortunately, most newspapers make a sizable portion of their revenues from their classified businesses (as do phone companies with their Yellow Pages). Unless they figure out a way to embrace consumer-to-consumer auctions, these revenues will wither and die. Today, two major online brands, Amazon.com and CNet, announced plans to build person-to-person auction services. It's just a matter of time until almost every online community -- even the ones not currently thought of as such -- offers such services. - Rafe Needleman, Editor rafe-needleman@redherring.com LATEST NEWS * Amazon turns shoppers into bidders redherring.com FURTHER READING * The product line: why eBay works redherring.com