Jeff Bezos cashes in? Amazon obese? eBay lost?
Years before I started this company (buyplaywin), I studied eBay and Amazon very closely, and more accurately, the founders of each: Jeff Bezos (amazon) and Pierre Omidyar (eBay). You might say they are my surrogate role models, because no matter what their companies have become, they saw an opportunity, and millions of convinced customers, business partners, and investors agreed.
These two e-commerce giants have become household names and I thought they’d always have a place online for their brand identities: eBay is authoritatively known for auctions, and Amazon is the same for having the most selection of goods, prices, and happy customers. The following articles show how the founders cashed out, describe the current state of the two companies, and suggest that their future is not as secure as I thought.
Amazon CEO Jeff Bezos and about 7 other top company execs just sold $82,221,046 worth of Amazon (AMZN) stock — with all but $3 million of that going into Jeff’s banking account.
Curiously, the sales started May 1 and continued through May 4 — just days before Amazon announced its new large screen Kindle in New York.
Do we have a case of insider trading on our hands?
No way. No how.
Clusterstock’s John Carney tells us these kinds of sales are scheduled “way ahead of time, without inside knowledge.” John says it’s also unlikely Jeff or any other top Amazon execs would have been able schedule the Kindle news around a pre-planned sell date.
“They can get in trouble if they schedule events to coincide with sales,” says John. “Usually, they get around this by not even knowing exactly when the scheduled sales happens. It’s all done blind.”
Here’s a chart we put together show who sold how much.
SEC filings are boring and hard to understand but often give revealing tibits about the companies we cover. In SEC Stalker, we translate these filings back into English, revealing the plays and people behind the companies we know so well.
Link to original article:SEC STALKER: Bezos Dumped $80 Million Of Amazon Stock In Kindle Run-Up (AMZN)
Check out the list of folks above, other than Jeff, who also cashed in their shares. Tom Alberg, for example, sits on the board of directors with Jeff, and is the Managing Director at Seattle-based Madrona Venture Capital Group. They were amongst his very first investors, thanks to Tom’s instincts.Diego Piacentini is Senior Vice President, International Retail, at Amazon.Com, Incorporated, since he came on in 2000. The list goes on.
Now let’s take a look how the market compares eBay to Amazon.
“At this point, the Street basically calls eBay a value trap,” he said. “‘It’s cheap, but it’s cheap for a reason. Things aren’t going to be better; they’ll get worse.’”
EBay’s sagging price-to-earnings ratio, and the expensive price tag on Amazon shares are clear barometers of investors’ appetite for the two e-commerce giants inexorably linked in Wall Street’s mind.
While shares of eBay have risen 7.5 percent since January, Amazon shares, on a steady upward climb since November, are up 55.5 percent.
Shares of eBay are valued at 10 times projected 2009 earnings, compared with Amazon’s 54 times.
The online auction pioneer is touting impressive growth at its PayPal Web payments service and Skype Web telephone company — once-auxiliary units — while trying to assure Wall Street it can invigorate its stalled marketplaces business which has been hit by competition from Amazon and others.
“They admit to a lot of mistakes and they have a very ambitious plan to turn the company around over the next couple of years,” said Solaris Asset Management’s Tim Ghriskey.
But he cautioned: “The Street basically doesn’t believe they’re going to do it.”
EBay predicts 2011 revenue of $10 billion to $12 billion, compared with the $9 billion expected by analysts.
“Until (eBay) has positive momentum on their marketplaces business, it’s hard for the stock to react and the valuation keeps creeping down,” said Royal Capital Management’s Robert Medway.
As Morningstar analyst Larry Witt said: “People are saying, ‘It’s got some interesting segments, but at best we think it’s flat growth or 3 percent growth. That’s not a reason for us to buy it.’”
He added that the market appears to have priced in a “very severe decline” in eBay’s auction business.
Amazon has the opposite problem. Its dizzying valuation caused Barclays Capital analyst Douglas Anmuth to write that the online retailer was “priced more toward perfection.” He downgraded shares to “equal weight” from “overweight.”
The company, which analysts say has navigated a difficult spending environment well, was not always so well-loved.
As recently as last year, Wall Street was griping about Amazon’s decelerating margins and focus on sales instead of profits. But as the recession took hold and consumers began cutting back, investors went ga-ga at the company’s ability to lure buyers and post double-digit sales rises.
“Amazon went through years of pain,” Ghriskey said, as Wall Street knocked projects like discount shipping program Amazon Prime — now lauded as a traffic driver — and profit-crimping technologies now deemed smart, such as the e-book reader Kindle.
Still, some investors say eBay might eventually get its house in order — just don’t expect short-term results.
Value investors are still getting a deal on eBay, argued Medway, even if its marketplaces unit continues to struggle.
Returning cash to shareholders could be the key to mollify eBay investors in the short term. Investors have pushed for more capital, including a dividend, with some complaining that eBay sinks more money into acquisitions than share buybacks.
Also, a sale of Skype looks increasingly likely amid reports that the unit’s co-founders are eyeing a purchase.
“If eBay doesn’t fix marketplaces, it’s still worth more than $15,” said Medway, who owns the company’s stock, citing eBay’s dominance in auctions. “This isn’t General Motors where they have a lot of expenditures. This is an all cash-flow business. It’s worth something.”
Link to original article: ANALYSIS - “Value-trap” eBay vs “priced to perfection” Amazon
Since most investment analysts are concerned about the ability of Amazon to grow in the future, let’s take a peek at Amazon’s investment track record in startups that share a common goal with the e-commerce giant.
Venture capitalists are struggling to find positive returns in this tough economy. But it’s not just the VCs that are hurting.
Amazon.com today said that the value of its investments in private companies fell to $89 million in the first quarter, down from $247 million at the end of last September. That’s a whopping 64 percent decrease in six months. The online retailer has been one of the more active investors in new Internet startups in recent years, taking stakes in companies such as Yieldex, Wikia, Elastra and Engine Yard.
Earlier this month, Amazon invested in Seattle online recipe site Foodista and San Francisco startup BookTour.
But just like venture capitalists, Amazon is having a hard time figuring out what value to place on startup companies these days.
“The current global economic climate provides additional uncertainty,” the company wrote in today’s SEC filing. “Valuations of private companies are inherently more difficult due to the lack of readily available market data. As such, we believe that market sensitivities are not practicable.”
Amazon.com was burned badly during the last downturn because of its invesments in failed Internet companies like HomeGrocer.com, Kozmo.com and Living.com.
However, there’s a big difference this time around. Unlike the multi-million dollar bets at the turn of the last decade, Amazon is now putting far less capital to work in individual deals. For example, both Foodista and BookTour raised less than $600,000.
If the startup companies are unsuccessful, the giant online retailer should be able to stomach those types of losses. However, no matter how small the loss, investors may begin to question why Amazon.com continues to bankroll these money-losing ventures.
UPDATE: R. Scott Tilghman, an analyst at Hudson Square Research, notes in an email that some of the declines in Amazon.com’s private portfolio were tied to the sale of its stake in Bill Me Later to eBay. Since Amazon’s investment would have been cashed out, Tilghman said the portfolio valuation would have been reduced. The Venture Capital Dispatch blog also notes the possible effect of the Bill Me Later sale.
Link to original article: Amazon’s startup investment portfolio takes a big valuation hit
Investing to secure your future can lead to playing both sides of the game, as Amazon has done, which is not mentioned in the article above. Amazon, which helped fund the social networking startup, now owns Shelfari and a stake in its primary rival LibraryThing (Techmeme). These sites allow friends to compile and share reading lists and book shelves.
Shelfari & Library Thing:
Checkout what LibraryThing had to say about Amazon’s Shelfari:
As I’ve said before, I have respect for LibraryThing’s 40+ competitors, but withhold it for Shelfari. They were rather famously called out by me and by others in a series of blog posts exposing a program of spamming and of “astroturfing” (paid employees posing as excited users in blog comments). The apologized on both occasions, but I have, quite frankly, the greatest contempt for them, and for what book-based social networking will become if they beat out LibraryThing.
Picture a boot stomping on a human face forever. Well, okay, not that. But picture the book social network wars ending with a site created by music people who probably wouldn’t get that allusion, with advertising all over, with “community managers” “managing” conversation between book lovers, and under the shadow of what will sell books and not books’ other, greater values. In short, I believe there’s something “to” the idea of book-based social networking which they don’t get, and to which they are a danger. Yes, I’ve drunk my own Kool-Aid.
Any case, once the Amazon/Shelfari deal goes through, we are competing against Amazon.
Link to original article:Amazon acquires book community Shelfari
Amazon and eBay are fighting to stay relevant and current. As a large company, it’s difficult to adapt to a change, so the strategy becomes, “buy what looks like the future for cheap, now”. Look at what has happened to the music industry, who certainly thought they didn’t have to heed this advice, until the iPod came along, and mp3 file sharing became mainstream. Is it any wonder that Jeff and crew are selling shares as fast as they can right now, and cashing out while Amazon stock is over inflated from the dissmal economy compelling consumers to shop online for the cheapest alternative? Pierre (eBay) did long ago.
In today’s cutthroat, unstable, and fast evolving business climate, I think I’d do the same thing, something I never would have said several years ago about a similarly successful company I may one day build.
