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Thursday, January 31, 2008

Amazon Q4:2007 Results

Amazon is perhaps the single greatest commerce service born of the internet age. No other site has taken such utter control of my discretionary spending dollars. I was the kind of kid that would wander through Sam Goody if I had a half hour to kill, perusing the racks. I don't think I've even been in a record store since 1999. Over time, they've taken my book dollars, my CD dollars, my DVD dollars and lately my consumer electronics dollars. And yet they just don't seem to be all that profitable. Consumers walk up and pour huge dollars into their top line and all their costs chew the dollars into teeny tiny pennies.

Frankly, I'm surprised they don't charge more for the service than they do. I trust them, they do me right, it's sooo convenient. They should charge a premium -- they're making my life easier.

That said, Amazon was easily the most expensive big cap "internet" company. I've always thought it was a mistake to compare them to anything but the retailers they compete with. When you compare them to a retailer, that valuation disparity becomes even more glaring. The stock is relatively expensive on almost any metric to its peers and its growth rates.

Amazon announced this morning they're buying Audible for $11.50 a share in cash. Yeah, I suppose it was going to be them or Apple. Amazon's bread and butter is books and music and they really need to get caught up on digital distribution -- they're going to lose market share in packaged products as the secular trend of instant gratification downloading continues. Digital distribution is the growth area for internet vendors now. Look for Digital River to be acquired for its digital software delivery expertise at some point, too.

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