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

To: MSI who wrote (54511)	5/1/1999 5:58:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Very good question. She's pivotal, isn't she? She could be an idiot, but I was just blown away by the brilliance and gall of the $1.5b convert that I lost my head and used her name with undue satiric license. Apologizies to both of you. No doubt it was hired guns that engineered that for huge fees. But the rest of the amzn financial machinery better be structured like clockwork. MSI, No apology is necessary. It is my guess that the decision to do the $1.5 billion convert came from Bezos (he was a former hedge fund employee at Shaws) or from Morgan Stanley. Clearly, it was brilliant. I also thought the zero coupon bonds last May was an excellent move too. I just do not wish to credit Covey in the event it was not her idea. I believe she is way overpaid as an accountant. Her vested options typically come to $2 million or more each quarter, plus her salary (that is small) and the shares she obtained at startup. I am not sure how she obtained those original shares. Covey also makes an effort to by-pass GAAP and that should not be necessary. Glenn

To: MSI who wrote (54511)	5/1/1999 7:20:00 PM
From: Jan Crawley	Respond to of 164684

You bring up a serious problem: separating the moves of management from manipulations of the financial fee-driven elephants, who are feasting on the phenomenon, & w. toss it away when done. A very good point. I watched "a book review speech"(on TV) given by Jeff B. a few weeks ago. I am sure that he loves the high Amzn stock price and has not and will not hesitate to take advantage of it. But that is not his main focus. He owns more than 50% of the outstanding shares, and he knows that he will not be able to cash all of them out at today's price, but he already has a lot and will have a lot more no matter what.

To: MSI who wrote (54511)	5/2/1999 9:13:00 AM
From: Glenn D. Rudolph	Respond to of 164684

Amazon.com – 29 April 1999 3 growth in new customers offsets seasonality. Importantly, however, this sequential growth will likely be slower than the 16% experienced this quarter and, again, the slowest in the company's history. It appeared that the company's January revenue growth was strong relative to the rest of the quarter (leading some to believe that the company's revenue this quarter might exceed $300 million). Revenue increased in all product categories (books, music, and video), and revenue in Europe jumped to $25 million. Customer accounts increased more than 2.2 million (a record) to 8.4 million. Amazon.com added more customers this quarter than most other online commerce companies have. Gross margin actually improved to 22.1%. Our long-term aggressive growth scenario assumes that Amazon.com will gain leverage in the gross margin line over the next few years. Given the company's extraordinary revenue growth, however, gross margin as percentage of revenue is less important than absolute gross profit; we do not, therefore, believe it necessary for the company to achieve a specific gross margin every quarter. However, the gross margin is clearly an important point of analysis (the big fear here is that “margins will go to zero”), so it is important to understand cost-of-goods-sold dynamics. Operating loss as a percentage of revenue was 10.4%, (better than our estimated 13%). However, we expect the operating loss as a percentage of revenue to increase significantly for the remainder of 1999 and 2000 as a result of increased investment in fulfillment infrastructure, new businesses, and customer service. In keeping with its stated strategy of focusing on long-term value creation rather than short-term bottom-line performance, management is significantly increasing its investment plans for 1999. As a result we have estimated Amazon's operating loss will more than double in Q2 1999 from Q1 to approximately $75 million (24.5% of revenue). This would be by far the largest quarterly operating loss Amazon.com has had in terms of absolute dollars. Amazon.com is rapidly increasing its investment rate with the aim of creating long-term value: customers, infrastructure, employees, technology, competition, market-share, and brand-building efforts outrank bottom line performance in management's hierarchy of priorities. Investors who believe in this long-term strategy and opportunity--as we do (although the magnitude of the planned increase took even our breath away)--should own the stock. Investors who don't, shouldn't. Customer acquisition cost for Q1 was $13, up slightly from Q4's record low $11. A key metric for all online retailers is customer acquisition cost--the average number of marketing dollars spent to induce a new customer to buy something at the site. Amazon.com has been walloping the rest of the industry in this metric, and continued to show great marketing efficiency in Q1. At some point, as the percentage of existing web users to new web users shifts more toward existing users (i.e., as soon as the growth rate of new Web users starts to slow), we expect that Amazon.com's customer acquisition costs will begin to trend higher. Until this happens, however, we believe the company is smart to spend as much as it can on marketing to try to win the loyalty of new Internet users before they shop somewhere else. As long as the customer acquisition cost remains stable, we do not care how much money Amazon.com spends on marketing—we hope that it spends as much as it can. EPS. Amazon reported a loss of $0.23 a share as compared to our estimate and consensus of $0.29 and a loss of $0.07 last year. As far as we are concerned, the company's EPS performance is relevant only as a benchmark--if EPS differ significantly from our estimate, we want to understand why, but only so that we can re-evaluate the long-term assumptions that form the basis for our model. We have revised our EPS projections for 1999 and 2000 (see below). The percentage of orders from existing customers (those that have bought from the company at least twice) continued to increase to 66% up from an all time high of 64% last quarter. We regard this as an excellent indication of Amazon.com's customer loyalty and hope to see this metric continue to improve. Progress of auctions. Amazon.com launched its auction business at the beginning of April. Management reported that in its first month, the service has had more users than the company's highly successful music roll-out did last year. Although this is not surprising given the increase in the company's customer base over this time, we believe it is excellent news.