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

To: Jenne who wrote (56062)	5/8/1999 10:40:00 AM
From: tonyt	Respond to of 164684

Barrons: Up & Down Wall Street .... A postcript to last week's note on what Amazon.com is worth comes to us via a reader named Jay Riemer. Mr. Riemer boasts wide and deep experience in mergers and acquisitions, is well-versed in the art of venture capital. He also did a stint as a securities lawyer (but no one's perfect). Prompting Mr. Riemer's communique was Amazon's decision to shell out $645 million worth of stock, essentially for an operation called Bibliofind.com. (The purchase actually will be of privately owned Exchange.com, which picked up Bibliofind in March and started up a music Website in April.) Bibliofind makes its money by charging sellers of used books $25 a month to list their offerings on its site. Buyers use the Bibliofind search engine to discover what they're looking for, Mr. Riemer explains, but the company doesn't get involved "in the actual transaction between buyer and seller, nor does it profit from it." Generous to a fault, Mr. Riemer figures there are 5,000 bookstores on the site. If each bookstore pays $300 a year, Bibliofind's total revenues come to $1.5 million. Mr. Riemer's generosity knows no bounds, and he cheerfully assumes "there are no ongoing costs, so profit is also $1.5 million." Since the population of used-book dealers, including those who dabble in rare and antiquarian volumes, is not threatened with growth, the only way to increase revenues and profits would be to boost the monthly fee. What, Mr. Riemer asks, would someone pay for a stream of $1.5 million annual payments? Let's assume this someone views "the payments to be as safe as a Treasury bond and accepts a 6% return. That would value Bibliofind at $25 million." On April 26, when Amazon disclosed the acquisition, it was selling at around $215 a share (it closed Friday under $137). Which leads Mr. Riemer to divine that Amazon is paying three million shares, equal to nearly 2% of the total shares outstanding. Well, he reasons, if management is willing to part with 2% of the company for an operation worth at most $25 million, the ineluctable conclusion is that management thinks Amazon is worth no more than $1.25 billion ($25 million times 50). Amazon, he further notes, has over 150 million shares outstanding. That means each share is worth roughly $8 ($1.25 billion divided by 150 million). Which, as it happens, is not far off one possible number we came up with last week, using a completely different method of evaluation. ...... Bond Vigilantes Can't Stop Dow's Rise Past 11,000 Internet stocks continue to march to their own drummer, which last week meant getting beaten like a drum, even as the broader market hovered near new highs. The Dow Jones Internet Index slid 9% on the week, leaving the measure 20% off its April peak of 318. The flipside to the unprecedented creation of billions in value overnight can be witnessed through Amazon.com, whose market capitalization ended Friday at $23 billion, down from a high of $35 billion a mere eight trading days earlier.