Reading Barron's cover story on Amazon where the publication loves damn near everything about the e-tailer---the cash flow, the business model, the cloud services, the marketplace for third party sellers and even the Kindle---and you can't help but flash back to a decade ago where it was dubbed Amazon.bomb.
In fact, the only thing that the 1999 and 2009 covers (subscription required for both) have in common is that Amazon CEO Jeff Bezos still isn't talking to Barron's. Barron's neglected to make the connection between the two covers so I'll take the honors.
Let's compare and contrast.
Amazon circa 2009 via Barron's:
This may be an opportune time to add shares of Amazon.com to your shopping cart and proceed to checkout. The stock makes sense because the retailer itself makes sense to smart shoppers. They don't waste valuable gas fighting for a parking space in a massive mall parking lot; they find prices that compete with Wal-Mart's and flirt with the Web's biggest bargains; and they can easily peruse a vast array of merchandise -- ranging from gigantic TVs to Elmore Leonard novels to disposable razors. What's more, their purchases tend to get delivered as promised.
The Amazon.bomb version of 1999:
Amazon is looking more and more like a traditional retailer, complete with an expensive network of warehouses loaded down with inventory. So far this year, Amazon has bought two warehouses in Kentucky and signed leases for facilities in Nevada and Kansas, adding to its two existing sites in Seattle and Delaware. In other words, Amazon is buying a lot of costly bricks and mortar, the very stuff that is supposedly bloating costs at traditional retailers.
In 2009 Barron's likes the Kindle:
The second kicker is Kindle, a digital-reading device. Its original version was generally well received, but its recently released 2.0 edition has become a hit with consumers. Wall Street analysts estimate the company has sold 350,000 of the devices, which got a plug from Oprah Winfrey last fall. A Kindle runs $359, and it not only generates revenue but protects and promotes Amazon's original business -- selling books.
In 1999 e-books were going to kill Amazon:
Bezos has not really revolutionized the book industry at all. In essence, he is a middleman, and he will likely be outflanked by companies that sell their wares directly to consumers. To begin with, publishing houses themselves could sell their books online. And new technologies promise to cut costs even further by allowing consumers to download books via the Internet. Books can be printed out on traditional computer printers or put into a new notebook-sized computer device that displays books on its screen a page at a time. One such device is the Rocket eBook, sold for $499 each by NuvoMedia. It's true that the retail price will have to fall further before Americans buy eBooks en masse. But it will happen.
Oddly enough e-books are still pretty pricey.
In 2009 Amazon is a better deal than Wal-Mart and Costco:
At a price of 70 on Friday, the shares sell at roughly 20 times the company's free cash flow of $1.36 billion, or $3.18 per share, in 2008. That is less than Wal-Mart 's (WMT) free cash flow multiple of 22.6 and Costco's (COST) 25.4.
In 1999 Wal-Mart was going to crush Amazon:
"Once Wal-Mart decides to go after Amazon, there's no contest," declares Kurt Barnard, president of Barnard's Retail Trend Report. "Wal-Mart has resources Amazon can't even dream about."
You get the idea. Comparing the two articles is quite a hoot. I agreed with Barron's take both times around, but boy what a difference a decade makes.
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