July 15, 2005 4:00 AM PDT
Amazon faces the challenges of its second decade
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be "Earth's most customer-centric company," goes on to promise "to build a place where people can come to find and discover anything they might want to buy online."
For an increasing number of online shoppers, however, that second goal is more efficiently accomplished by online shopping engines. The shopping comparison business heated up recently with a pair of big acquisitions: Scripps last month acquired Shopzilla for $525 million, days after eBay said it would acquire Shopping.com for $620 million. Google has been testing its online retail search, Froogle, since 2002.
"That's where the search challenge to Amazon's growth comes into play," Alvarez said. "Now that they offer a lot of categories, getting you in front of the product in as few clicks as possible really matters."
More competition looms in the as-yet-undefined world of digital and on-demand delivery. Apple Computer demonstrated the potential of digital delivery with its successful iTunes music store, but that success has yet to be replicated with movies or books.
On average, analysts show ambivalence about Amazon's prospects. Of 22 analysts surveyed by Thompson First Call, six rate it "buy" or "strong buy," 10 rate it "hold," and six rate it "sell" or "strong sell."
Despite concerns about competitive pressure, Smith Barney's Mahaney said his "hold" rating reflects the solid position Amazon has staked out in its 10 years.
"From a really long-term point of view, given where it started, it's a profitable, fast-growing business," Mahaney said. "You're still talking about a company with a market cap of $15 billion. I think Amazon's worth $15 billion."
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