EC25 - Professor Haim Mendelson and Philip Meza prepared...

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Unformatted text preview: Professor Haim Mendelson and Philip Meza prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. The case was edited by Mary Petrusewicz. Copyright © 2001 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, email the Case Writing Office at: [email protected] or write: Case Writing Office, Graduate School of Business, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of the Stanford Graduate School of Business. Version: (A) 7/27/01 G RADUATE S CHOOL OF B USINESS S TANFORD U NIVERSITY CASE NUMBER: EC-25 JULY 2001 A MAZON . COM : M ARCHING T OWARDS P ROFITABILITY Ouch. It’s been a brutal year for many in the capital markets and certainly for shareholders. As of this writing, our shares are down more than 80% from when I wrote you last year. Nevertheless, by almost any measure, the company is in a stronger position now than at any time in its past… The year 2001 will be an important one in our development. As a first step, we’ve set the goal of achieving a pro forma operating profit in the fourth quarter. While we have a tremendous amount of work to do and there can be no guarantees, we have a plan to get there, it’s our top priority, and every person in this company is committed to helping with that goal. —Jeff Bezos, Founder and CEO,, Letter to Shareholders, April 2001 I NTRODUCTION For much of its six-year history, the rallying cry at had been “get big fast.” The company spent many millions of dollars to acquire and service customers. The strategy worked the company got big fast. Amazon mostly sold books, CDs, and DVDs; but it also offered barbecues, big screen TVs, and many things in between. In 2000, a mere five years after it opened for business, Amazon served 20 million customers, up from 14 million in 1999 (see Exhibit 1 ), and sales grew from $1.64 billion in 1999 to $2.76 billion in 2000. However, Amazon lost $720 million in 1999 and $1.4 billion in 2000 fueling its phenomenal growth (see Exhibit 2 for selected Amazon financial data). In his first letter to shareholders in Amazon’s 1997 annual report, Bezos explained his company’s strategy and the metrics he cared about most: We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise. Marching Towards Profitability, EC-25 Amazon....
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This note was uploaded on 03/01/2012 for the course FINANCE 780 taught by Professor Scott during the Spring '12 term at Missouri State University-Springfield.

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EC25 - Professor Haim Mendelson and Philip Meza prepared...

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