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

To: GST who wrote (53069)	4/28/1999 7:43:00 AM
From: MoonBrother	Respond to of 164684

This Is D-day! Let's Rock 'n Roll!!! In the meantime, enjoy analyst's comment! ---------------------------------------- 01:47am EDT 28-Apr-99 BT Alex. Brown Incorporated (S. Andrikopoulos/J. Pat) AMZ AMZN: Exchange.com Acquisition Reinforces Our Digital Trade-Strong Buy-Part 1/2 Andrikopoulos, Shaun G. (415) 477-4234 04/28/1999 Patel, Jeetil J (415) 477-4223 BT Alex. Brown Incorporated ------------------------------------------------------------------------------- AMAZON.COM INC. (AMZN) "STRONG BUY" Exchange.com Acquisition Reinforces Our Digital Trade Network Investment Thesis Outlined Last Year--Reiterate "Strong Buy" (1) Investment Rating -Part 1/2 ------------------------------------------------------------------------------- Date: 04/27/1999 EPS: 1998A 2000E Price: 205.87 1Q (0.07)R (0.29) NE 52-Wk Range: 217 - 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):31,786 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 ------------------------------------------------------------------------------- HIGHLIGHTS: -- Amazon.com announced that it will acquire 3 companies, including Exchange.com, Accept.com and Alexa Internet, for roughly $645 mm in stock. -- We are excited about Amazon's acquisition of Exchange.com, as it reinforces our Digital Trade Network (DTN) investment thesis outlined 11 months ago. -- Through the Exchange.com acquisition, the Company could be in a unique position to establish a leading DTN within the book and music industry, by enabling physical world book vendors to access its audience. -- It appears clear that Amazon, in moving to toward the DTN concept, is continuing to extend its core Internet franchise into the physical world, while maintaining its focus on its core book business. -- The Company also launched an on-line greeting card service which, we feel, will serve to significantly increase the stickiness of the service. -- We believe that the on-line greeting card service represents a powerful and cost-effective customer acquisition engine for the Company. -- We reiterate our "Strong Buy" investment rating on shares of Amazon.com. DETAILS: Amazon.com announced that it plans to acquire 3 companies, including Exchange.com, Accept.com and Alexa Internet, for approximately $645 million in stock. We anticipate these deals to close sometime during 2Q 1999. The Company is acquiring Accept.com, an e-commerce company specializing in developing solutions that simplify consumer-to-consumer (c2c) and business-to-consumer (b2c) commerce transactions on the Internet. Amazon also plans to acquire Alexa Internet, an advertising supported Web navigation service that provides consumers with useful information about the sites being viewed and subsequently suggests related sites. We feel this acquisition will fit in with the Company's 'Shop The Web' (STW) service by referring its customers to content sites on the Internet, and third-party commerce partners. Most importantly, we are excited about the Company's acquisition of Exchange.com, the leading marketplace for hard-to-find books and music, which reinforces our Digital Trade Network investment thesis on Amazon.com. As we have mentioned on multiple occasions in the past, we believe that Amazon is poised to merchandise or offer other popular product segments, including software, flowers and greeting cards, in future quarters. The Company launched an on-line greeting card service today which, we feel, will serve to significantly increase the stickiness of the service. We feel that the service will be well regarded by both customers and investors alike. EXCHANGE.COM ACQUISITION BUILDS BOOK AND MUSIC INVENTORY Amazon.com announced that it plans to acquire Exchange.com, the premier marketplace for hard-to-find, antiquarian and used books, and music recordings and memorabilia on the Internet. Exchange.com's book site is located at www.bibliofind.com, while its music site can be found at www.musicfile.com. The acquisition will significantly increase and build out the Company's book- and music- product offerings, while enabling thousands of independent dealers and retailers to sell and auction hard-to-find books, recordings and memorabilia to Amazon's large and rapidly-growing base of 8+ million customers. We feel that the acquisition will help jump-start the Company's recently-launched on-line auction service. Specifically, Bibliofind.com has a book database made up of more than 9 million listings, and allows thousands of small dealers of rare books to upload their inventories and manage their businesses on-line efficiently and cost-effectively. The Bibliofind.com site also offers community features, such as chat sessions, and matches book purchase requests with available books. MusicFile.com is the premier site and community on the Internet for collectors of hard-to-find music and memorabilia. MusicFile has built a database of more than 3 million items from dealers, retailers, and private collectors worldwide. The site also has community features by enabling members to chat and build homepages and storefronts, a want-ad posting/matching service, and articles and information from music experts. EXCHANGE.COM \endash REINFORCES DTN INVESTMENT THESIS OUTLINED 11 MONTHS AGO We feel that the Exchange.com acquisition reinforces one of our core investment thesis on Amazon.com which we outlined almost 11 months ago (in our Net/net dated June 6th, 1998). We believe that the Company could be in a unique position to establish a leading digital trade network (DTN) within the book and music industry, by enabling physical world book vendors to access its audience. We feel that the Company has several of the required elements necessary to build a best-of-breed DTN, including: -- leading product fulfillment, -- ability to aggregate a "99% SKU" inventory availability (with other related products and services), and -- ability to aggregate audience critical mass both on the Internet and through other non-Internet channels. Through the Exchange.com acquisition, Amazon has taken the DTN concept one step further by enabling members of the merchant community (dealers, storefronts, collectors) to become suppliers on the Amazon.com network, thereby extending these merchants' market reach across the aggregate DTN audience. Over time, we feel that the DTN could lead to a virtuous cycle where buyers in the member community become sellers, and vice versa. Moreover, contributors and information experts (either on books or music) within the Exchange.com community will likely become contributors within the larger on-line community of the Amazon.com network, a key characteristic of a DTN in our opinion. In sum, it appears clear to us that Amazon is moving to toward the digital trade network (DTN) concept and, in effect, continuing to extend its core Internet franchise into the physical world, while maintaining its focus on its core book business. We feel that the Company will continue to develop and evolve its DTN model over the next several years, by aggregating and integrating a broad base of independent dealers and storefronts in the DTN. ON-LINE GREETING CARD SERVICE IS AWESOME!!! As we have mentioned on multiple occasions in the past, we believe that Amazon is poised to merchandise or offer other popular product segments, including software, flowers and greeting cards, in future quarters. The Company today launched a new on-line greeting card service, which should serve to significantly increase the stickiness of the service. The Company will most likely leverage its previous acquisition of PlanetAll (and its database of names and dates) to scale usage on the service. We believe that the on-line greeting card service represents a powerful customer acquisition engine, and a cost-effective one at that! Amazon could not only see an increase in the number of unique visitors to the site but also an uptick in the 'minutes per usage month' metric higher than the 13.1 minutes per month recorded in March (according to Media Metrix). This would boost the total usage hours higher from the current 2.3 mm hours on the site. Visitors Home/Wk. Min. per Usage Company (000s) Reach Usage Month Hours -------------------- -------- -------- ----------- ------ Amazon.com 10,736 17.4% 13.1 2.3 mm BlueMountainArts.com 11,089 18.0% 12.4 2.3 mm eGreetings.com 1,505 2.4% 11.6 291,000 American Greetings 594 1.0% 4.4 44,000 Source: Media Metrix (March '99) and BT Alex. Brown research % of % of Amazon-to-Web Web Users Amazon Users User Index --------- ------------ ------------- Hallmark Card Store 21.8% 25.0% 115 Source: @plan data, and BT Alex. Brown research Our research also suggests that the average Amazon.com customer indexes slightly higher than the Web average for purchasing products from a traditional greeting cards store, such as Hallmark. Furthermore, 25% of Amazon.com customers have also used the Hallmark store, a key glimpse into the untapped opportunity that lies in front of the Company. REITERATE 'STRONG BUY' (1) INVESTMENT RATING 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: GST who wrote (53069)	4/28/1999 7:43:00 AM
From: MoonBrother	Respond to of 164684

01:47am EDT 28-Apr-99 BT Alex. Brown Incorporated (S. Andrikopoulos/J. Pat) AMZ AMZN: Exchange.com Acquisition Reinforces Our Digital Trade-Strong Buy-Part 2/2 Andrikopoulos, Shaun G. (415) 477-4234 04/28/1999 Patel, Jeetil J (415) 477-4223 BT Alex. Brown Incorporated ------------------------------------------------------------------------------- AMAZON.COM INC. (AMZN) "STRONG BUY" Exchange.com Acquisition Reinforces Our Digital Trade Network Investment Thesis Outlined Last Year--Reiterate "Strong Buy" (1) Investment Rating -Part 2/2 ------------------------------------------------------------------------------- Date: 04/27/1999 EPS: 1998A 2000E Price: 205.87 1Q (0.07)R (0.29) NE 52-Wk Range: 217 - 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):31,786 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 ------------------------------------------------------------------------------- for the bookseller with only 50,000 titles in stock, this is not one of them. What to do? Today, in order to not lose a potential future customer, the merchant tuns to a huge book called Books in Print, the bible for the book selling industry over the past 50 years. Books in Print purports to include every book ever written. Poring through the pages the merchant finds the book and orders it from his distributor (Ingram) over the telephone. When the title arrives at the store 10-15 days later he calls the customer hoping that he/she has not found the title elsewhere (or worse yet turned to the Web). It is a tough way to lose customers and money. After all the time associated with searching for and special ordering the book and calling the customer, it is hard for the independent bookseller to eke out a profit. There should be a better way. THERE IS: AMAZON.COM. Heretical? Hardly. We believe there is a potential link that electronic retailers can make with established on-line retailers across different markets that could revolutionize the way traditional retail fronts operate. More importantly, this link could enable e-commerce vendors to break out of their supply-chain orientation into a much broader orientation and audience. By leveraging their core fulfillment competencies, on-line retailers can significantly lower their customer acquisition costs while increasing their overall net margins. E-COMMERCE TOMORROW, THE 'DTN' We foresee a future where e-commerce vendors will be able to leverage their technology-enabled fulfillment infrastructures across a much broader audience (i.e., the 75% of the economy that is not on-line) by turning their supply orientation on its side. We envision a world where retailers take their fulfillment engines beyond direct to consumer merchant models to create digital trade networks (DTNs) that aggregate large numbers of buyers across both new and established retail channels. BACK TO THE BOOKSELLER - A GAME PLAN How would this work for the independent bookseller? Imagine that Amazon has established a DTN for independent booksellers. Each bookstore with enough volume is given (free of charge) a low-cost Net PC with monthly Internet access directed towards a special area of Amazon's site. Now, when customers come to the store, booksellers use Amazon's DTN to find hard to order titles. No longer does our corner retailer have to search for "Jobs in Paradise" in Books in Print and deal directly with his supplier. Instead he/she is able to turn directly to Amazon. The credit card is collected at the store and the book (wrapped in local bookstore paper with a "powered by Amazon" label) arrives in the mail at the customer's home in 2-3 days. The Amazon DTN could even recommend other books to the retailer that the customer might like (based on the customer's prior purchases and the system's built in knowledge base). The retailer may even be able to double his total revenues if the system makes a recommendation the consumer accepts. ECONOMICS From an economic perspective the bookseller could capture a 10% commission on the total sale. This is infinitely preferable to the loss which would have been generated had the book been back ordered through the merchant's more traditional mechanism. Amazon also benefits. The DTN enabler captures 20-30% contribution margins on the title (more than the margin captured by direct consumer sales through Amazon.com since the book can be sold at full retail). If we assume that the Net PC set-up costs Amazon $750 initially and $250 in yearly on-line charges the system pays for itself after only 200 $20 orders have been placed through the system. We envision a time when many small booksellers could begin to limit their inventory exposure to drive the bulk of their sales through the more efficient virtual DTN inventory. Just imagine the potential in other sectors of our economy. EVERYONE WINS -- TRUE COOPERATION Instead of creating a vertical middleman structure between producers and consumers, the DTN leverages the fixed cost fulfillment infrastructure across an aggregated set of retail fronts including the Web, Web affiliates, "brick and mortar" store fronts and other established channels. In the DTN, producers, distributors, traditional vendors and on-line retailers become members of a central hub or trade community that serves the needs of all parties. In the Amazon DTN example: -- Customers win because they are able to deal efficiently with their favorite independent booksellers. They pay for the book at the cash register and in 2-3 days it arrives in the mail. -- Booksellers win because they are able to satisfy consumer demand that may have otherwise gone to a Superstore or the Web. While they only capture 10% of the sale, they would have lost money had they special ordered the book themselves. The retailer also gains access to a virtual 2.5 million title inventory without inventory risk or cost. -- Amazon.com wins because the Company is able to expand its reach into the 75% of the book buying market that is not addressed by the Web today. Further, the Company is able extract a higher net margin from each sale because the books command higher prices with little associated on-line distribution costs. THE POWER OF AGGREGATION The three core elements, in our view, to DTN sustainability and defensibility are: 1) The ability to establish a best-of-breed, technology driven fulfillment infrastructure that can be leveraged across many retailing partners and channels. 2) The ability to aggregate a "99% SKU" inventory availability with other related products and services that fit in the segment (Amazon carries music and videos in addition to books). 3) The ability to aggregate audience critical mass both on the Internet and through other non-Internet channels (such as independent retailers). We believe that Amazon.com could be in a unique position to establish a leading DTN within the book industry today. It has two of the three required elements: leading fulfillment and an aggregated virtual inventory with every book in print today. Moreover, the Company does not have a conflict with its own entrenched retail presence (we believe that it would be unlikely for Barnes and Noble to develop a DTN for independent book sellers since it would cannibalize its own retail presence). The challenge lies in convincing traditional retailers they have nothing to fear in working with Amazon, a potential source of competition in the overall market. We believe this challenge could be overcome with private label packaging (where the retailer's brand is presented to consumers when packages arrive) and intelligent in-store design (consumers do not need to know that the retailer uses Amazon for its out of inventory fulfillment). TAKING IT ONE STEP FURTHER In the DTN members of the merchant community could also become suppliers to others on the network, thereby extending their market reach across the aggregate DTN audience. Over time the DTN begins to snowball as buyers become sellers and visa versa. An Amazon DTN could completely transform the way retailers approach selling books. Independent booksellers who are DTN members could ultimately become contributors to a larger on-line community where they develop areas of expertise within the greater network. A bookseller with a particular interest and expertise in history could list his unique used book inventory within Amazon's DTN and could serve as a reference librarian for Amazon.com's direct to consumer Web site. While his need for a real inventory decreases the bookseller reinvents himself as a source of information about which books are really valuable to consumers and he becomes an arbiter in the market for used history books. While this scenario may sound farfetched in the book business, we could envision many other industry segments that would benefit immensely from this type of aggregated distribution mechanism. We can apply the DTN concept to other vertical segments across our economy to see how the e-commerce phenomenon can, over time, reach well beyond its Internet roots. For example, we could see a scenario where computer, software, automobile, financial services, and other e-commerce vendors could leverage their highly efficient technology and fulfillment infrastructures into non-Web channels to truly revolutionize our economy. It is conceivable that every person-to-person retail environment will be enabled by a DTN in the background.