TODAY’S CLASS 5:00-6:30 Crossfire: Valuation 6:30-6:45 Break 6:45-7:40 Case discussion: Amazon.com

excite@Home NEXT CLASS GUEST SPEAKER Steve Harris Topic: “Using Customer Data to Develop Evaluation Metrics”

Homework due next session Prepare Case: Chapter 7 Prepare Crossfire: : Metrics for evaluating e-Businesses

Amazon.com Snapshot - Bezos started Amazon in 1995 with a customer focus - Metrics (1999) Revenues $1.6 B Net loss $720 M Employees 7,600 Markets: Books (54%), music, DVDs, videos, toys, electronics, software, video games, home improvements, and lawn and patio

Disagreement Over Goals Amazon Management Shareholders - Growth in new industries - Profitability - Partnership/affiliations - Positive cash flow - Market share - Higher stock price How do you merge these goals and develop a strategy to meet the vision of becoming Earth’s Biggest Store?

Traditional Models for Valuing Common Stock Choices for parameters: Which measure of income? Whose perspective? Which discount rate? Which growth rate?

Traditional Models for Valuing Common Stock Choices for parameters: Which measure for multiple? Which comparison? Raw or adjusted multiple? What time period for comparison?

New Models for Valuing Internet Stocks Choices for parameters: Which multiple measures? Which comparison? Raw or adjusted multiple? What time period for comparison?

A Pretty Web Site is not Enough

Top Ten E-Business CSFs

“The Amazon.com platform is comprised of brand, customers, technology, distribution capability, deep EC expertise, and a great team with a passion for innovation and serving customers well… We believe that we have reached a ‘tipping point,’ where this platform allow us to launch new EC businesses faster, with a higher quality of customer experience, a lower incremental cost, a higher chance of success, and a clearer path to scale and profitability than perhaps any other company.” Jeff Bezos 1999 Annual Report

“The Amazon.com platform is comprised of brand, customers, technology, distribution capability, deep e-commerce expertise, and a great team with a passion for innovation and serving customers well.” Jeff Bezos 1999 Annual Report

“We believe that we have reached a ‘tipping point,’ where this platform allow us to launch new e-commerce businesses faster, with a higher quality of customer experience, a lower incremental cost, a higher chance of success, and a clearer path to scale and profitability than perhaps any other company.” Jeff Bezos 1999 Annual Report

The key to valuing companies is understanding the market’s consensus forecast for their key value drivers, how their cost of capital changes over time, and the shape that their industry competition will take a decade or more from now.