Amazon.com Inc. Review

Amazon.com Inc. is the leading online retailer that deals with electronic products and cloud hosting services. The company was founded by Jeff Bezos in 1994 but the website, which is the main marketing and selling platform for the company, was launched in 1995 (Olsen 2008). Currently, the company’s headquarters are in Seattle, Washington, US. The company operates several websites that target different markets i.e. in UK, France, Japan, China, Italy and Germany (Byers 2006). The company is also planning to launch other websites that will target Netherlands, Poland and Sweden. Apart from selling electronic products, Amazon.com also offers cloud hosting services to companies all over the world.

Amazon.com was named after the Amazon River which is also believed to have been named after the female Greek worriers. Although Amazon is associated with phenomenon things, Bezos decided to use it because the name would appear high in any alphabetically arranged list. The logo that Bezos chose was also a representation of a catalogue (A-Z), the arrow that is used to bridge A to Z forms a smile and which forms the core objective of the company; to make customers happy by providing high quality services. At its inception, the company was an online bookstore but as grew it incorporated other products such as CDs, MP3 products, DVDs, apparels, toys, furniture, video games and jewels. The found attests that his philosophy of “regret minimization framework” was essential in catapulting the company to its current position (2006). His idea of selling books online was motivated by the imagination of how many units an online database could hold as compared to physical bookstores that are have limited space.

Throughout the first four years of business, the company did not make any profit and many shareholders were perplexed by the nature of business the company was engaged in. soon critics were proved wrong because during the fourth fiscal year the company made profit. Profit was not the only book marker but the fact that there seemed to be a major drift in selling of books from bookshops to eBooks the company was on track to made even more exploits as the online market continued to increase. As result of the tremendous growth, Bezos won the person of the year’s award that was presented by Time Magazine for promoting online shopping amongst American citizens.

The strategies that the company had employed to overcome its competitors in the market did not go unnoticed, in 1997 Barnes & Noble filed a case against Amazon.com alleging that the company was claiming to be the leading bookstore in the US against the facts on the ground. The case was later resolved amicably through arbitration. In 1998 another lawsuit was filed against Amazon.com by Walmart with the same claim that the company perpetually referred itself as the market leader, it further claimed that Amazon had benefited from trade secrets that had been disclosed by former executives that were at the time working for Amazon. This case was also settled through arbitration but Amazon made adjustments to its recruitment policies that would discourage hiring of former executives from Walmart henceforth.

Company Summary

o Company Founder, Chairman, President and CEO – Jeff Bezoso

o Year of formation – 1994

o Regions – worldwide

o Headquarter – Seattle, Washington, U.S, Luxembourg (European Headquarter) and Miami, Florida.

o Number of employees – 65, 600

o Main products – A2Z Development, A9.com, Amazon.com, Alexa.com, Amazon Kindle, Amazon Studios, Audible.com, Junglee.com, dpreview.com, IMDb, LoveFilm, Endless.com, Zappos.com, Woot.com

o Company main website – Amazon.com

 

Company Portfolio

The average market capitalization for Amazon.com is 96.84bn with an average of 4,035,050 shares being traded in the New York stock market. 52 weeks rage for per share is 166.97 – 246.71 while today’s range stands at 212.61 – 217.30. The previous day’s closing price was 218.367 while the opening price per share was 216.72

Metrics

Return on investment (ROI), which is calculated as returns on investment/cost of investment, is dependent on the time when the shares were bought. Currently the day’s rate of price change (ROI) stands at negative (-) 3.16% while the share price has dropped by 7.06 dollars.

Earnings per share (EPS) this is the profit that the company makes from the stock market. EPS is (profit-dividends)/number of shares. Currently, EPS for Amazon.com is 1.21

Price to Earnings Ratio (P/E) is a comparison between the companies current share price to its per-share earnings. The current P/E for Amazon is 177.19. This ratio is indicative of the real value of the shares.

Period Ending 31 Dec 2011

Stockholders’ Equity

Misc Stocks Options Warrants –

Redeemable Preferred Stock –

Preferred Stock –

Common Stock 5,000

Retained Earnings 1,955,000

Treasury Stock (877,000)

Capital Surplus 6,990,000

Other Stockholder Equity (316,000)

Total Stockholder Equity 7,757,000

 

Why you should buy shares of Amazon.com

Since the company was listed in New York Sock Market in 1997, the company’s shares have shown considerable growth. From 1.5 dollar per unit to 215.36 today is a tremendous growth. As the company progressively opens up new markets, the demand of its shares grows. Since the 2008 global recession the value of the shares has been growing rapidly and the prospects are still high especially as the company continues to open new markets.

The global prospects for increasing sales of the company’s products remain high. Medium and small enterprises software markets are still not tapped. Any prospective buy should consider investing in Amazon shares because they are more likely to exhibit higher returns on investment.

Future for Amazon.com

Since its inception in 1994, the company has been making great business progresses. It has expanded into other countries (markets) with a lot of ease; this is not usually the case with every other business that tries to penetrate foreign markets however, the company sells versatile products that can easy sold and delivered anywhere on the planet. Although many other companies have adopted the approach employed by Amazon.com, the company is far much established than any of its competitors around the world. The fact the company works with developers based in different countries, still gives the company a lead over its competitors. These centers can better understand regional market requirements than working from a centralized development center.

Looking at the Stock performance chart, it’s easy to notice that the share price has been improving over the past 8 years. However, the growth seems to have decreased from 2011 and the shares are struggling to stabilize in 2012. P/E for Amazon.com is 177.19 is the highest as compared to Apple Inc’s 14.59. EPS for Amazon.com is 1.21 while Apple, Inc has Earnings per Share of 41.04. Market capitalization for Amazon stands at 97.03bn while that of apple is way above and stands at 560.01bn. By all counts Apple seems to be doing better in the stock market than Amazon. But in comparison to other companies under the same category, Amazon is superior.

Amazon.com has established its market niche and is unlikely to lose it. There are many small companies that offer similar products around the world but the superiority of Amazon and the wide range of products that they offer is unlikely to be overridden by any other company in the coming days. To safeguard its market interests, the company has also hired a wide range of professionals that have continued the culture of innovation in the company.

According to Roy (2005), the future of any company depends on its sales strategies. A company’s survival is dependent on the sales strategies that it employs. Even though the company enjoys a big market share in software products and cloud hosting services, it should not stop at that because there are millions of small and medium enterprises that do not have access to such services. The company should employ strategies that will allow it penetrate both the upper and lower markets. The upper markets may provide high returns but the lower one will always decide the market leaders. Many smaller software venders are also targeting these markets.

 

References

Amazon.com Inc. (AMZN) –NasdaqGS. (July 12, 2012). Competitors. Retrieved from http://finance.yahoo.com/q/co?s=AMZN

Byers, A. (2006). Jeff Bezos: the founder of Amazon.com, The Rosen Publishing Group. 5, 46-47

Olsen, S. (July 14, 2008). “Amazon invests in Engine Yard’s cloud computing. Business Tech – CNET News”. News.cnet.com. Retrieved July 7, 2012.

Roy, C. (2005). Your Company’s Future Depends on Making Sales a Process. Executive Training and Development. Retrieved from http://www.maxsacks.com/articles/article5.html