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

To: Iris Shih who wrote (58666)	5/26/1999 1:20:00 PM
From: Glenn D. Rudolph	Respond to of 164684

S&P gives prelim. ratings to Amazon.com shelf (Press release provided by S&P) NEW YORK, May 26 - Standard & Poor's today assigned its preliminary single-'B' senior unsecured, preliminary triple-'C'-plus subordinated, and preliminary triple-'C' preferred ratings to Amazon.com's <AMZN.O> $2.0 billion mixed shelf registration. At the same time, Standard & Poor's revised its outlook on Amazon.com's existing ratings to stable from developing. Standard & Poor's also affirmed its single-'B' corporate credit and senior unsecured ratings, and its triple-'C'-plus subordinated rating for the company. The outlook revision reflects Standard & Poor's belief that Amazon.com's enhanced financial flexibility will provide a cushion over the next couple of years as its business model evolves toward a broader product set and gains the critical mass required to attain satisfactory profit margins. Revenue growth, as well as customer growth and retention, has been encouraging. Amazon.com had more than $1.4 billion in cash and marketable securities as of March 1999. Furthermore, the company historically has had relatively small cash outflow relative to its net losses, primarily due to a vendor-financed inventory operating cycle. Standard & Poor's expects this benefit to diminish, however, as the company invests in a more substantial distribution system and as inventory increases as a percent of sales. The ratings for Amazon.com continue to reflect the risks of rapid growth in an evolving marketplace, as well as Standard & Poor's expectations of negative free operating cash flow over the next several years due to more aggressive investment and diminishing benefits from vendor financing. The ratings also consider the potential for margin deterioration due to heightened competition on the Internet and the introduction of new product categories. These risks are tempered, somewhat, by Amazon.com's current position as the leading on-line retailer of books, music, and videos. Amazon.com has been successful in creating a strong brand, which is critical to the long-term success of any retailer selling goods through the Internet. The company's customer list and revenue base have about tripled in the past 12 months, increasing the likelihood that Amazon.com may eventually reach the critical mass necessary to achieve positive operating income--particularly in its core book selling business. While new product launches and large marketing efforts improve Amazon.com's market presence and consumer awareness, management is making a conscious decision to delay near-term profitability in favor of long-term positioning. Large investments in distribution facilities in 1999 should eventually improve the company's delivery times and allow more direct buying from book and music publishers. Amazon.com is well positioned to protect its leadership in "e-commerce" because of its ability to quickly launch new product categories, react to competitive forces, and make acquisitions with its currently strong stock currency. OUTLOOK: STABLE Although downward pressure on the rating is limited due to the company's large cash holdings, evidence that Amazon.com's business model can achieve profitability is not anticipated over at least the next year. While some progress has been made in the company's core book retailing business, more favorable trends must exist before a positive change in the outlook can be considered, Standard & Poor's said.