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- 2. Marjorie Berthelot-Mariat Florent Benhayoun Florent Polito Pierre Gouesclou Pierre Riffard
- 3. US Overview
- 4. US Overview
- 5. Player Characteristics Sector: Service Industry: Electronic retail Quote: AMZN Market Capitalization: 114 Billion Fiscal year: December 31 Founded: 1917 Charles and Williams Barnes G. Clifford Noble Employees: 88,400 Sector: Service Quote: BKS Market Capitalization: 1 Billion Industry: Retail Fiscal year: April 27 Founded: 1994 Jeff Bezos Employees: 34,000 114 $114 Billion $1 Billion 77 Years 19171994 2.588,400 34,000 BE THE WORLD’S SUPPLIER
- 6. -100000 0 100000 200000 300000 400000 500000 600000 700000 Amazon Barnes & Nobles Ebay Apple Walmart Google Net Income Market cap Inventory Competitors: Amazon 18.5% 37.8% 0.4% 0% 24.0% Inventory over Total Assets (In millions) 0.5%
- 7. -100000 0 100000 200000 300000 400000 500000 600000 700000 Barnes and Noble Amazon Apple Books-A-Million Net income Market Cap Inventory Competitors: Barnes and Noble 37.8% 18.5% 0.4% 70.4% Inventory over Total Assets (In millions)
- 8. E-Commerce Why E-commerce ?What is Dangerous Full of opportunities Few rules GOLD
- 9. Dangerous & few rules HackersBlack markets 2.7 Billion internet users Impossible to control every virtual transactions
- 10. Opportunities Everybody is on the internet… Governments Consumers Companies …and buys everything
- 11. Gold of the E-commerce Big Data:2.7 billion customers Willing to buy anywhere In several ways Anything At any time Huge amount of information Imagine the possibility to foresee the future $6.8 Billion $17 billion by 2015 IDC
- 12. Common strategies •Cost-conscious culture : #1 motive for AMZN : guarantee the lowest prices (Sell premium hardware at breakeven prices) •Maximizing the present value of future cash flows •Satisfied or reimbursed services •Customer-driven focus •Focus on growth •Long-term investments •Develop digital content •Develop partnerships with hardware/ software/ retailers companies (Microsoft) •Maintain relationship with colleges and universities •Innovation (Nook) •Attract customers to the multi-channel platform The Strategies
- 13. HOW DOES AMAZON INVEST? Technology: Add computer scientists, software engineers, merchandising employees Invest in several areas of technology: Digital initiatives, expansion of new and existing physical Invest in digital product categories and offerings + technology infrastructure Cash used in investing activities (in $ billion) 2010 2011 2012 3.4 1.9 3.6 Important variability (in 2011) because changes in CapEx and changes in cash paid for acquisitions, purchases, maturities, sales of marketable securities and other investments What about other investments? Excess cash invested in investment grade short-to intermediate-term fixed income securities and AAA rated money market funds. +89.4%
- 14. New stores E-Commerce improvements, maintenance of existing stores and system enhancements for the retail and college stores. Cash and cash equivalents, net cash flows from operating activities, short-term vendor financing… Brand partnerships, investment agreement Predict to sell content in 10 international markets CAPITAL EXPENDITURES (in $ millions) 2011 2012 110.5 163.6 How does Barnes and Noble invest? +48%
- 15. Portfolio analysis Star DogCash cow Question marks E-book (Kindle) Music Download Amazon on demandOnline book sales Online consumer goods HIGH HIGH LOW LOW Relative market share Marketgrowthrate
- 16. Swot Analysis Amazon Strenghts Weaknesses Threats Opportunities Customer service Diverse product offering Constantly evolving Seasonal Brick stores E-commerce Maturing Free shipping = profit loss Brand confusion Global expension (BRIC) Video on demand Kindle segment
- 17. Swot Analysis Barnes and Noble Strenghts Weaknesses Threats Opportunities Store location Strong web presence Newest Nook HD is very competitive= low price Lot of competition Significant cost to maintant physical stores Pressure Lose money Rapid change in digital technologies Partnerships with Microsoft International presence with nook media Gross for the BKS college section
- 18. Geographical Overview Population percentages of internet uses675 stores 686 College bookstores 14 Customer services 13 Development centers 59 Fulfillment centers 13 Corporate Offices Data base U.K. Digital bookstore Data base
- 19. Did you know? All these companies belong to Amazon
- 21. Kindle vs. NOOK KINDLE NOOK
- 22. Most expensive: Kindle Fire HDX 8.9” (Wi-Fi and 4G; 64 Gb) = $ 594 • Includes: 2.2 GHZ quad processor, an 8.9” HD screen with an 339 PPI, free cloud storage and a 8MP rear-facing camera with LED flash for high resolution photos and 1080 p HD video. • Battery life : 12 hours Most popular and sold: Kindle Fire HD 7” (8 Gb): Advantages (based on most popular Kindle): 1. 1.5 GHZ dual-core processor 2. eBooks at low prices 3. Integrated stereo speakers with Dolby Digital Most expensive: Nook HD+ 9” (Wi-Fi ; 32 Gb) = $ 179 Includes: 1.5 GHZ dual-core processor, a 9” HD screen with a 256 PPI , free cloud storage. Only comes in 16 GB and 32 GB. Displays HD up to 1080 p + Expendable Memory with micro SD. Battery life: 10 hours Most popular and sold: Nook HD 7” (8 Gb): Advantages (based on most popular Nook): 1. PRICE 2. More content to use 3. More pixels/ inch 4. Expandable memory KINDLE VS. NOOK WINNER!! LOSER!! $ 154 $ 129
- 23. Tablet market 25% 75% % of tablet's use North America International Tablet devices from top manufacturers like Apple, Samsung and Amazon. source: ABI Research, Dec. 2013 Overall tablet sales (in million) 2013 2012 227 171 According to Strategy Analytics 34% 18% 6% 4% 38% Worldwide Market share by manufacturer Apple Samsung Amazon Asus Other +62%
- 24. 93% 7% 116% 38% -4%-31%(512) -66% -7% 50% -6% +23% -13% +12% -35% Total Operating Loss: (220) Op Income (without NOOK): 292 -> Over-estimation of holiday demand (less sales than expected for tablets) -> Higher occupancy costs (new office space in Pao Alto, CA (digital expansion) -> Fewer NOOK sold, reduced selling prices (many promotions), but higher content sales STRATEGY: -> To expand worldwide into the e-commerce through NOOK BUT -> NOOK’s costs increase, and market share diminishes -> Still represents the biggest growth potential for future sales/earnings (to counterbalance the declining growth in physical retail) The NOOK Issue
- 25. Cloud war Elastic Compute Cloud Whisper Sync. Cloud drive Amazon Instant video Amazon Cloud player Whysper Sync : Enables customers to follow their documents, movies throughout any device. Amazon Instant Video : Enables customers to resume their movie on a different device from which they stopped. Cloud Drive : Enables customers to stock their photos , videos and documents Elastic Compute Cloud : Enables developers to control the capacity of computing resources they are using Nook Cloud A cloud where all products bought through BNS or Nook are stocked WINNER!! LOSER!!
- 26. HOW DOES AMAZON SELL? Financial focus: long-term sustainable growth in free cash flow per share Products on their website = Merchandise and content purchased for RESALE from VENDORS and those OFFERED BY A THIRD-PARTY SELLERS HIGH INVENTORY VELOCITY = Collects from consumers before their payments to suppliers come due. CONSTANTLY SELL ADDITIONAL EQUITY OR DEBT SECURITIES, OBTAIN CREDIT FACILITIES Increasing Operating income, efficiently managing working capital + CapEx E.g: Lowering prices, improving availability, faster delivery and performance times, increasing selection…
- 27. HOW DOES BARNES & NOBLE SELL Uses the brand and retail footprint to attract customers to multi-channel platform Drive content sales through the WEB, Nook Readers and 3rd party devices Pay a commission to certain vendors who distribute the NOOK. - Reduction in sales price Barnes & Noble Member Program = greater discounts, benefits Expand distribution channels through strategic partnerships
- 28. Advertising Ads on the website that link to your own website Cost per click fee Attracting source of revenue for Amazon
- 29. The real problem… Warehouses Distribution In the World
- 30. Amazon: Shipping Activity +47% +29% +17% Reduce shipping rates More expensive shipping methods Offer new shipping services Optimizing fulfillment Negotiating better terms Increasing the operating efficiency To offer the lowest selling price + To offer the lowest shipping cost + To offer the fattest and more convenient shipping method -> Attract customers -> Maintain loyalty -> Increase Revenues Competitive advantage Growth opportunity
- 31. Amazon Premium $ Quick deliveryAccess to Kindle libraryPrice reduction Share WHY ? Steady Revenue Loyal Customers Spread their influence
- 32. S trategyStep 1: Act as a retailerStep 2: Retail retailersStep 3: Sellers MarketStep 4: Amazon Web service Less inventory Commissions
- 33. AMAZON: Payment Methods PAYING WITH A CREDIT, DEBIT, OR GIFT CARD USING SHOP WITH POINTS AMAZON CURRENCY CONVERTER CHECKING ACCOUNT AMAZON PAYMENTS (on amazon.com) INVOICES
- 34. BRANDS PARTNERSHIP: BARNES & NOBLE MORRISON & MICROSOFT PEARSON LIBERTY (Inc.) April, 2012: creation of the Nook media. Morrison purchase 300,000 convertible preferred membership interest. Price: $300 million December, 2012: Pearson invested $89.5 million of cash in Nook Owns 78.2% of Nook Media August. 2011: Liberty purchased 204,000 shares of the company’s preferred stock. Par value/ share = $0.001 Price = $204 million Nook has developed and distributed a Windows 8 application for e-reading + intellectual property license and settlement agreement with Microsoft. Price : $60 million/year from Microsoft Owns 16.8% of Nook Commercial agreement : Nook distributes Pearson content
- 35. BRANDS PARTNERSHIP: AMAZON AWS PROGRAM 22 network partners. Who could it be? Helping their partners develop florishing activities. Often Start ups.. Global management consulting, technology services and outsourcing company, National business and technology consulting firm, founded in 2001 with 2500 employees. Provider of fully- managed services for Amazon Web Services (AWS) products
- 36. Amazon square footage 3% 53% 0% 44% Square footage Owned NA Leased NA Owned Int Leased Int Offices 9% Warehouses + others 91% Square Footage 97%
- 37. Amazon square footage Owned Office space 27% Leased office space 48% Leased office space 25% Square footage 1% 0% 53% 46% Square Footage Owned fulfillment, datacenter, and other Owned fulfillment, datacenter, and other Leased fulfillment, datacenters and other Leased fulfillment, datacenters and other 73%
- 38. Lease 0 500 1000 1500 2000 2500 3000 3500 4000 4500 2013 2014 2015 2016 2017 Thereafter Unconditional purchase obligations Operating leases Financing lease oglibations, including interest Capital leases, including interest Debt principal and interest Gives an idea of their strategy Avoids the lease to be seen in Liabilities
- 39. Market Segmentation 2012 67% 26% 11% -4% Sales B&N retail B&N college Nook Elimination The elimination represents sales from NOOK to B&N Retail and B&N College on a sell through basis. -1 + 2 +2 + 2 65% 21% 14% Depreciation and Amortization +2 +3 -5 31% 23% 46% Capital expenditures +24.3 -1.07 -22.6 67% 12% 21% Sales by Product lines Media Digital Other +1-3 +2
- 40. Amazon Global Overview Leader of its sector Costly and risky but promising activity Many of our current and potential competitors have greater resources, longer histories, more customers, and greater brand recognition. They may secure better terms from vendors, adopt more aggressive pricing and devote more ressources to technology, infrastructure, fulfillment, and marketing
- 41. Barnes & Noble’s Competitor Nook devices and accessories Toys and Games Ecommerce Website Books Books-A-Million Amazon- Kindle Apple- iPad Toys “Я” us Amazon Books-A-Million 2 major competitors: AMAZON & BOOKS- A-MILLION
- 43. Analysis of all the Competition B&N clearly leads the book retail industry with 13.5 times more sales than the U.S. second largest book retailer. Most of Amazon competitors are Giants (or Titans) with much more sales and history, but that does not discourage Amazon to fight with them! Shows how retailers are struggling to have positive earnings, especially in our current global economic context B&N has much more assets and resources (PPE, debts) Amazon’s size is much less developed (Apple has less debts for three times more assets) (except Walmart, other companies have much less inventory due to their different business)FCF negative, both companies are losing cash after maintaining/expanding their assets. -> Increasing difficulties to develop and to reduce debts (reducing future opportunity of growth) FCF positive, create many opportunities to grow (new products, acquisitions, dividends, pay back debts…), but the FCF of Amazon is insignificant compared to competitors Beta Analysis: The riskier companies are BAMM (extremely volatile), AMZN, and EBAY WMT is very stable compared to the markets (0.41) Profitability extremely low or negative for retailers (WMT succeeds to reach a 3.6% ROS) Much more higher for technology companiesAAPL, AMZN, and EBAY have a negative CCC (=important market power, receive cash from customers before paying suppliers) BAMM and BKS have an extremely high CCC, has to borrow funds for 105, and 50 days respectively to pay off suppliers AAPL and GOOG have exceptionally low debts AMZN, and IBM are well above 50% making the companies riskier P/E especially high for EBAY and GOOG (expansive stock, high potential for growth) P/E negative for BKS and AMZN due to negative earnings (and an expansive stock price for AMZN)The first worldwide capitalization (AAPL) Market Cap in hundreds of billions for the giant companies, AMZN can be now compared with them. Insignificant Market Cap for the two largest book sellers (decline of the “physical” retailers.
- 44. 57% 43% % of AMZN's sales in 2012 56% 44% % of AMZN's sales in 2011 North America International AMZN’s Sales 37% 60% 3% AMZN Net Sales 2011 Media Electronics and other general merchandise Other 44% 54% 3% AMZN Net Sales 2012 Media Electronics and other general merchandise Other
- 45. -140% -120% -100% -80% -60% -40% -20% 0% 20% Q4 Q1 Q2 Q3 Total 2012 Growth BKS: Quarters' growth EPS NI Sales -600% -500% -400% -300% -200% -100% 0% 100% Q1 Q2 Q3 Q4 Total 2012 Growth AMZN: Quarters' growth EPS NI Sales Growth Rates Increasing sales Huge fall in NI and EPS Sales globally decreasingEPS and Net income falling Inc. taxes expenses: 47% Equity-method investment activity, net of tax: 1192% Sales: 27% Softer fall of NI and EPS Sales: -3% NI: -47% EPS: -40% Gross profit: 40.2% Operating income: -21.6% EBIT: -36.3% Net income -106.2%
- 46. Historical revenues, Millions of $ 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Amazon's 10 years Total Revenues ($M) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Barnes and Noble' 10 years Total Revenues ($M) 1000% x4 X11 15%
- 47. Net Income Comparison ($M) ( 400) ( 200) 0 200 400 600 800 1 000 1 200 1 400 2004 2005 2006 2007 2008 2009 2010 2011 2012 AMZN BKS Difference: $41M only Costs/Expenses has increased more than Sales Stable, then Sales stabilized with costs and expenses slightly increased
- 48. -150% -100% -50% 0% 50% 100% 150% 200% 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Amazon Revenue COGS Operating Expense Net Income TITLE (BKS victory case)Comparative Growths in Operations Average Sales growth: 31% COGS and especially Operating expense increased too much compared to the sales to maintain positive Earnings’ growth. The slower increase in operating expense allowed a 68% operating income’s growth which boosted the earnings by 151% (from $190M to $476M). NI28% due to a 184% growth in interest income and foreign currency gains Rapid global operations expansion strategy which negatively impacted and impacts operating income. Less important growth in costs/expense.
- 49. TITLE (BKS victory case)Comparative Growths in Operations -350% -300% -250% -200% -150% -100% -50% 0% 50% 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Barnes & Noble Revenue COGS Operating Expense Net Income Average Sales growth: 5% Higher growth in costs/expense which slowed earnings’ growth or decreased earnings. Sales decreased by 5%. The bigger decrease in costs (6%) were not sufficient to cover the 1% operating expense growth. B&N also recorded a $9.5M loss from Calendar Club. COGS’ grew quicker than sales. In 2010, the operating income was already negative. NI 2009->2011: $37M->$(74M) The growth of COGS moved slightly slower than sales’ but the growth of operating expense moved slightly quicker. The result were an $5M increase in earnings (+7%). Sales 4% COGS 1% Op exp 4% NI 129%
- 50. Returns over 10 years -300% -250% -200% -150% -100% -50% 0% 50% 100% 150% 200% 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 2012-12 2013-12 ROA ROE ROS -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 2004-01 2005-01 2006-01 2007-01 2008-01 2009-01 2010-04 2011-04 2012-04 2013-04 ROA ROE ROS STOCKHOLDER’S EQUITY DEFICIT STOCKHOLDER’S EQUITY INCREASED ASSETS INCREASED SALES INCREASED NI “STABLE” Almost NO VARIATIONS NI became NEGATIVE A slightly increased Sales slightly increased E slightly decreased ROA: 21.75% -> 0.75% (growth rate down by 21%) ROS: 8.5% -> 0.37% (growth rate down by 8.13%) ROE: -259% -> 3% (growth rate up by 256%) ROA: 4.67% -> -4.21% (growth rate down by 8.88%) ROS: 2.55% ->- 2.31% (growth rate down by 4.86%) ROE: 13.28% -> -22.6% (growth rate down by 35.88%)
- 51. DOL,DFL,DTL DOL DFL DOL DFL DTL DTL 23.78 27.80 1.17 <7.65> 0,86 <6.59> =EBIT/(EBIT-Interest) =DOL x DFL =Gross Profit/EBIT =DOL x DFL =Gross Profit/EBIT HAS HIGH DEBT DFL=1 means that the company has no debt HAS HIGH DEBT =EBIT/(EBIT-Interest) 1% change in sale gives X% change in EBIT
- 52. CCC Analysis 2011 Cash Conversion Cycle: DSO+ICD-APD Can Afford Shot Term Investments Has to pay Suppliers before getting their money back Few inventory Commission system Data base Important inventory Physical presence E-retail 98 8 98 50 47 22 <35> 104 2%<2%> 3% 7% ICD DSO CCC ICD DSO CCCAPD APD <8%><9%> <6%> <29%>
- 53. Dec 31 2012 Dec 31 2011 B/W Apr 27 2013 Apr 28 2012 B/W Current Ratio 1.12 1.17 W 1.19 1.12 B Quick Ratio 0.80 0.84 W 0.37 0.25 B Gross Margin 24.75% 22.44% B 24.60% 26.90% W ROS -0.06% 1.31% W -2.31% -0.91% W ROA -0.12% 2.50% W -4.23% -1.72% W ROE -0.48% 8.13% W -13.47% -6.89% W DSO (days) 22.49 21.88 W 7.86 8.58 B ICD (days) 47.23 48.20 B 98.49 107.89 B APD (days) 104.29 107.60 B 56.21 59.63 W CCC (days) -34.57 -37.52 W 50.14 56.84 B Receivable Turnover 16.01 16.45 W 45.79 41.95 B Inventory Turnover 7.62 7.47 B 3.66 3.34 B Total Asset Turnover 1.88 1.90 W 1.83 1.89 W Equity Multiplier (leverage ratio) 3.97 3.26 W 2.90 3.61 B Debt/Assets 74.84% 69.31% W 65.47% 72.33% B Debt/Equity 2.97 2.26 W 1.90 2.61 B TIE (x) 6.91 15.37 W -6.22 -1.55 W EPS (0.09)$ 1.39$ W (2.71)$ (1.13)$ W Price Earnings -2913.95 124.27 W -6.70 -12.10 B Price to Book 13.87 10.11 B 0.82 0.75 B Market Cap (in millions) 113,644.11$ 78,414.30$ B 1,057.18$ 784.37$ B AMZN BKS RATIOS Comparative Ratios AMZN vs BKS 24.75% Sales27.1% but COGS23.3% 24.60% Sales4.1% but COGS1.1% Sales4% but NI143% ($158M)Sales27% but NI106% ($39M) -0.06% -2.31% 16.01 45.79X 2.9 Lower level of AR -> BKS collects cash quicker 7.62 3.66X 2.1 AMZN turned its inventory twice as much as BKS -> stronger sales -> Demand and Offer adaptability 75% 65% AMZN financed 10% more of its Assets with debt -> more financial risk $(0.09) $(2.71)$1.39 $(1.13)-106% -140% -2914 13.87 Stock price not expensive + Negative Earnings -12.1-6.7 0.82 High PE -> High potential for growth Stock very expensive Negative and insignificant earnings 124 The Market Capitalization is 14/0.8 times the Total Equity $784M$1,057M$78B$114B +46% +35% Results (20112012): AMZN :29% BETTER BKS: 62% BETTER W B B B B B W B B B W B B W W W B B W B B Is AMZN better or worse ? Results: AMZN is 67% BETTER
- 54. VALUATION RATIOS B/W Amazon Industry P/E Ratio (TTM) B 589,8 43,04 P/E High - Last 5 Yrs. B 676,78 88,15 P/E Low - Last 5 Yrs. B 65,92 19,95 Beta B 0,91 1 Price to Sales (TTM) B 2,14 1,73 Price to Book (MRQ) B 16,3 3,79 Price to Tangible Book (MRQ) B 22,42 4,75 Price to Cash Flow (TTM) B 44,17 15,38 Price to Free Cash Flow (TTM) B 78,27 5,01 100% %B GROWTH RATES B/W Amazon Industry Sales (MRQ) vs Qtr. 1 Yr. Ago B 20,31 7,86 Sales (TTM) vs TTM 1 Yr. Ago B 21,87 11,74 Sales - 5 Yr. Growth Rate B 31,18 7,58 EPS (MRQ) vs Qtr. 1 Yr. Ago B 143,23 8,35 EPS (TTM) vs TTM 1 Yr. Ago W 748,71 -- EPS - 5 Yr. Growth Rate W -16,97 9,6 Capital Spending - 5 Yr. Growth Rate B 59,56 8,5 71% %B BKS 1,30 0,12 1,24 4,59 50,44 BKS 7,98- 8,28- 318,12 245,74- B/W W W W B B 60% B/W W W B W 25% Reuters Ratios
- 55. FINANCIAL STRENGTH B/W Amazon Industry BKS B/W Quick Ratio (MRQ) W 0.75 0.9 0.38 W Current Ratio (MRQ) W 1.07 1.12 1.10 W LT Debt to Equity (MRQ) B 32.74 50.54 8.69 W Total Debt to Equity (MRQ) B 32.74 76.36 19.23 W Interest Coverage (TTM) B 13 2.34 0.49- W 60% %B 0% PROFITABILITY RATIOS B/W Amazon Industry BKS B/W Gross Margin (TTM) W 27.23 37.53 24.65 W Gross Margin - 5 Yr. Avg. W 24.49 31.54 EBITD Margin (TTM) 5.37 0.12 EBITD - 5 Yr. Avg W 5.02 8.13 Operating Margin (TTM) W 1 6.81 3.27- W Operating Margin - 5 Yr. Avg. W 1.99 5.05 Pre-Tax Margin (TTM) W 0.68 7.27 3.78- W Pre-Tax Margin - 5 Yr. Avg. W 1.92 5.19 Net Profit Margin (TTM) W 0.46 4.78 2.89- W Net Profit Margin - 5 Yr. Avg. W 1.3 3.14 Effective Tax Rate (TTM) W 31.82 41.78 Effective Tax Rate - 5 Yr. Avg. W 31.99 89.92 0% %B 0% Reuters Ratios
- 56. EFFICIENCY B/W Amazon Industry BKS B/W Revenue/Employee (TTM) 76,615,446$ 193,933$ W Net Income/Employee (TTM) 3,388,864$ -5,614$ W Receivable Turnover (TTM) B 18.31 16.23 30.76 B Inventory Turnover (TTM) W 8.06 10.99 2.92 W Asset Turnover (TTM) B 2.05 1.27 1.54 B 67% %B 40% MANAGEMENT EFFECTIVENESS B/W Amazon Industry BKS B/W Return on Assets (TTM) W 0.95 5.97 4.46- W Return on Assets - 5 Yr. Avg. W 2.75 4.32 Return on Investment (TTM) W 2.25 10.72 9.21- W Return on Investment - 5 Yr. Avg. W 6.42 7.28 Return on Equity (TTM) W 3.05 13.36 28.21- W Return on Equity - 5 Yr. Avg. W 8.52 8.61 0% %B 0% 48% Total %B 19% Reuters Ratios
- 57. $ in millions Amazon Barnes and Nobles 2012 2011 2012 2011 Net Income $<39> $631 $<157> $<65> Sales $61 093 $48 077 $ 6 839 $ 7 129 Total Asset $ 32 555 $ 25 278 $ 3 732 $ 3 775 Owner's Equity $ 8 192 $ 7 757 $ 1 289 $ 1 045 EM= TA/OE 3.97 3.26 2.9 3.61 TAT= Sales/TA 1.88 1.9 1.83 1.89 ROS= NI/Sales -0.06% 1.31% -2.31% -0.91% ROE= ROS x TAT x EM -0.48% 8.13% -12.24% -6.21% Comparative Dupont equation High EM: More debt 2.9 No gain on sales-0,06% -2,31% 3.97 -0.48% -12.24%
- 58. Variations Dupont equation Amazon Better/Worse Barnes & Nobles Better/Worse EM 22% Worse -20% Better TAT -1% Worse -3% Worse ROS -105% Worse 154% Worse ROE -106% Worse 97% Worse Total 0% 25%
- 59. Analysts’ Opinion Recommendation Trends Current month Last month Two months ago Three months ago Strong Buy 15 14 14 13 Buy 19 20 19 20 Hold 10 10 10 10 Underperform 0 0 0 0 Sell 0 0 0 0 Recommendation trends Current month Last month Two months ago Three months ago Strong Buy 0 0 0 0 Buy 1 1 1 1 Hold 3 4 4 5 Underperform 1 1 1 1 Sell 0 0 0 0
- 60. Analysts’ Opinion 1 15 = 15 2 19 = 38 3 10 = 30 4 0 = 0 5 0 = 0 44 83 1.89 Current Month 1 13 = 13 2 20 = 40 3 10 = 30 4 0 = 0 5 0 = 0 43 83 1.93 Three months ago -2%
- 61. 1 0 = 0 2 1 = 2 3 5 = 15 4 1 = 4 5 0 = 0 7 21 3 Three months ago 1 0 = 0 2 1 = 2 3 3 = 9 4 1 = 4 5 0 = 0 5 15 3 Current Month Analysts’ Opinion No change
- 62. Analysts’ Estimate (Morning star) 0 5 10 15 20 25 dividend yield Earning Yield cash return S&P 500 Amazon Barnes and Noble 30 year Bond 00 0 0.2 5.6 2.3 3.6 23.3 1.3
- 63. $ In millions Period Ending Dec 31 2012 % Apr 27 2013 % Total Revenue 170 100% 19 100% Cost of Revenue 128 75% 14 75% Gross Profit 42 25% 5 25% Selling General and Administrative 21 13% 4 23% Advertising Costs 6 3% 0 2% Others 13 8% 1 3% Operating Income or Loss 2 1% (1) -3% Total Other Income/Expenses Net (0) 0% 0 0% Earnings Before Interest And Taxes 2 1% (1) -3% Interest Expense 0 0% 0 1% Income Before Tax 2 1% (1) -4% Income Tax Expense 1 1% (0) -1% Equity-method investment activity, net of tax 0 0% 0 0% Net Income (0) 0% (0) -2% One Day ISOne Day IS Comparative one day income statement 2012 19 75% X9 170 75% 24% 25% (0) (0) We strive to offer our customers the lowest prices possible through low everyday product pricing and shipping offers
- 64. ($M) Period Ending Dec 31 2012 Dec 31 2011 V V% Apr 27 2013 Apr 28 2012 V V% Total Revenue 61,093 48,077 13,016 27.1% 6,839 7,129 (290) -4.1% Cost of Revenue 45,971 37,288 8,683 23.3% 5,156 5,212 (55) -1.1% Gross Profit 15,122 10,789 4,333 40.2% 1,683 1,918 (235) -12.3% Selling General and Administrative 7,723 5,464 2,259 41.3% 1,564 1,623 (59) -3.6% Advertising Costs 2,000 1,400 600 42.9% 111 116 (6) -4.7% Others 4,723 3,063 1,660 54.2% 227 233 (6) -2.4% Operating Income or Loss 676 862 (186) -21.6% (220) (55) (165) -302.9% Total Other Income/Expenses Net (40) 137 (177) -129.2% Earnings Before Interest And Taxes 636 999 (363) -36.3% (220) (55) (165) -302.9% Interest Expense 92 65 27 41.5% 35 35 0 0.1% Income Before Tax 544 934 (390) -41.8% (255) (90) (165) -184.0% Income Tax Expense (428) (291) (137) 47.1% 98 25 72 -289.1% Equity-method investment activity, net of tax (155) (12) (143) 1191.7% Net Income (39) 631 (670) -106.2% (158) (65) (93) -143.4% BKSAMZN Comparative IS Horizontal analysis (155) (12) X12 48B61B (39) 631 8B 5B 41% (290) The number of employees increased from 56,200 to 88,400 -4% Reduction of wages due to the reduction of the number of employees from 35,000 to 34,000 (55)(220) (158) Decrease of their cost of good sold thanks to a decrease of B&N retail and college COGS Due to a 19% increase of their inventory -300% B&N keeps on generating income loss. They would require outside financing to avoid bankruptcy -36%636 29% investment in LivingSocial
- 65. ($M) PeriodEnding Dec312012 % Dec312011 % V V% Apr272013 % Apr282012 % V V% CashAndCashEquivalents 8,084 25% 5,269 21% 2,815 53% 160 4% 54 1% 106 196% ShortTermInvestments 3,364 10% 4,307 17% (943) -22% NetReceivables 3,364 10% 2,571 10% 793 31% 149 4% 170 5% (21) -12% Inventory 6,031 19% 4,992 20% 1,039 21% 1,411 38% 1,562 41% (151) -10% Deferredtax 453 1% 351 1% 102 29% 327 9% 221 6% 105 48% TotalCurrentAssets 21,296 65% 17,490 69% 3,806 22% 2,047 55% 2,007 53% 40 2% PropertyPlantandEquipment 7,060 22% 4,417 17% 2,643 60% 585 16% 623 16% (38) -6% Goodwill 2,552 8% 1,955 8% 597 31% 495 13% 520 14% (24) -5% IntangibleAssets 548 15% 564 15% (16) -3% OtherAssets 1,524 5% 1,388 5% 136 10% 57 2% 61 2% (4) -7% DeferredLongTermAssetCharges 123 0% 28 0% 95 339% TotalAssets 32,555 100% 25,278 100% 7,277 29% 3,733 100% 3,775 100% (42) -1% BKSAMZN Comparative BS: Total assets $8B $160M 54M$5B x50 x92 1.4B6B x4 21% 22% -10% 2% 10% 60% -7% -6% 26B33B 4B x8 x7 4B
- 66. ($M) PeriodEnding Dec312012 % Dec312011 % V V% Apr272013 % Apr282012 % V V% BKSAMZN AccountsPayable 13,318 41% 11,145 44% 2,173 19% 805 22% 863 23% (58) -7% OtherCurrentLiabilities 5,684 17% 3,751 15% 1,933 52% 910 24% 933 25% (23) -2% TotalCurrentLiabilities 19,002 58% 14,896 59% 4,106 28% 1,715 46% 1,797 48% (81) -5% LongTermDebt 3,084 9% 255 1% 2,829 1109% 77 2% 324 9% (247) -76% OtherLiabilities 2,277 7% 2,370 9% (93) -4% 420 11% 367 10% 53 15% TotalLiabilities 24,363 75% 17,521 69% 6,842 39% 2,444 65% 2,730 72% (287) -10% CommonStock 5 0% 5 0% 0 0% 0 0% 0 0% 0 2% RetainedEarnings 1,916 6% 1,955 8% (39) -2% 410 11% 586 16% (176) -30% TreasuryStock (1,837) -6% (877) -3% (960) -109% (1,064) -29% (1,058) -28% (6) -1% Additionalpaid-incapital 8,347 26% 6,990 28% 1,357 19% 1,384 37% 1,341 36% 43 3% AccumulatedothercomprehensiveLoss (239) -1% (316) -1% 77 24% (17) 0% (17) 0% (0) 0% TotalStockholder'Equity 8,192 25% 7,757 31% 435 6% 1,289 35% 1,045 28% 244 23% TotalLiabilitiesandStockholders'Equity 32,555 100% 25,278 100% 7,277 29% 3,733 100% 3,775 100% (42) -1% Comparative BS: Total liabilities and Total equity x14 $19B 1100% -76% 39% -10% x5 1.9B x6 8.2B 0.4B 1.3B $1.7B$15B x8 $1.8B 26B33B x8 x7 4B In the 2012, Amazon issued $3B of unsecured senior notes. B&N did not issue any long term bonds during the year 2012 Principally due to the issuance of new long term debts Repurchase program 4B
- 67. Current Assets 0 10 20 30 40 50 60 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 2012-12 2013-12 Cash & Short-Term Investments Accounts Receivable Inventory 0 5 10 15 20 25 30 35 40 45 2004-01 2005-01 2006-01 2007-01 2008-01 2009-01 2010-04 2011-04 2012-04 2013-04 Cash & Short-Term Investments Accounts Receivable Inventory % of Current assets % of Current assets Higher percentage of Inventory Higher Percentage of Cash and ST Investment General decreaseStabilization
- 68. Comparative Debt/Equity 75% 25% AMZN 2012: Equity and Debt Debt Equity 65% 35% BKS 2012: Equity and Debt Debt Equity 72% 28% BKS 2011: Equity and Debt Debt Equity 69% 31% AMZN 2011: Equity and Debt Debt Equity
- 69. ($M) AMZN BKS Period Ending Dec 31 2012 Apr 27 2013 OPERATING CASH FLOW Net income (39) (158) Depreciation Expense 2,159 233 Increase (Decrease) in Account Receivable (895) 21 Increase (Decrease) in Inventories (1,039) 151 Increase in other Current Assets (105) Increase (Decrease) in Other Assets (136) 4 Increase (Decrease) in Account Payable 2,173 (58) Increase (Decrease) in Other Current Liabilities 1,933 (23) Increase (Decrease) in Accumulated other comprehensive Loss 77 0 TOTAL OPERATING CASH FLOW 4,233 64 INVESTING CASH FLOW Sale of short term investment 943 Purchase of PPE (4,802) (195) Purchase (Sale) of Goodwil (597) 24 Sale of Intangible Assets 16 Increase in Deferred Long Term Asset Charges (95) TOTAL INVESTING CASH FLOW (4,551) (155) FINANCING CASH FLOW Issuance (Retirement) of Long Term Debt 2,829 (247) Issuance (Retirement) of Other Liabilities (93) 53 Retirement of Long Term Liability Charges (12) Issuance of Preferred Membership Interests 382 Issuance of Redeemable Preferred Stock 1 Dividends Paid (18) Purchase of Treasury Stocks (960) (6) Issuance of Common Stocks 1,357 43 TOTAL FINANCING CASH FLOW 3,133 197 CHANGE IN CASH 2,815 106 Comparative cash flow X 4 X 66 X 24 X 29 X 31 X 26 (1,039) Amazon increases inventory leading to more expenses How can we explain this then ? Massive Investment in Property and equipment on both sides. Goodwill for AmazonAmazon is favorable to investments compared to BKS who limits capital expenditures…. …as a consequence Amazon Comes to massive financing: -Long term Debt -Issuance of Common StocksWhy do they buy treasury stocks ? Stabilize EPS Maintain the value of the amazon share Gain on the exchange when they will resale it later AMAZON WANTS AND NEEDS MORE CASH TO EXPAND ITS ACTIVITIES
- 70. Cash Flow History Most of the growth rates are positive except… -14% -17% -81% 162% 85% 109% 6% 12% 7% Corporate Headquarters ($1.2B) + three city blocks of land ($210M) 3 785 + $7B of P+E to maintain $600M of P+E to maintain -314% -112% 48% (188) (24) 164 Due to a large increase in device and accessory inventory ($180M) 117 (49) 166 With a negative or no FCF, opportunities to expand/grow diminishes and reducing debts become more difficult. No real trends… Due to a $151M decrease in inventory
- 71. Cash Flow Trend ( 300) ( 200) ( 100) 0 100 200 300 400 500 600 700 2004-01 2005-01 2006-01 2007-01 2008-01 2009-01 2010-04 2011-04 2012-04 2013-04 Barnes and Noble 0 1 000 2 000 3 000 4 000 5 000 6 000 2004-12 2005-12 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 2012-12 2013-12 Amazon Operating Cash Flow ($M) Capital Expenditures ($M) Free Cash Flow ($M) Result of the growing capacities of Amazon FCF mostly depends on OPCF which is on a constant decline (lower earnings due to a negative growth in store sales) -> The financial focus is long-term Huge increase in capital expenditures Increase in operating cash flow -> FCF decreased but maintains a sustainable growth -> Investment/expansion in e-commerce (NOOK media) -> Digital delivering infrastructure improvements Capital expenditures OPCF FCF
- 72. Stock Price Analysis over 5 years Fed Tapering Start (Dec 2013) Current amount: $55B $45B increase in Asset-Purchase Program (Jan 2013) QE3 Start (Sept 2012) $40B Asset-Purchase Program QE1 End (Aug 2010) $1,250B MBS Purchase $300B treasury Securities Purchase QE2 (Aug 2010) $600B treasury Securities Purchase $72.61 bullish trend (+397%) $ 360.62 $21.90 mostly bearish trend (-4%) $ 20.94 $8.45 $26.96 $408.06 $69.75
- 73. Stock Price Comparison YTD S&P 500 1831.98 1872.01 (Mar 20, 2014) +2% AMZN $397.97 $368.97 (Mar 20, 2014) -7% BKS $14.66 $21.05 (Mar 20, 2014 ) +44% Beginning of a “correction” due to the release of some lower-than-expected economic data Janet Yellen took office as the new Chairman of the Fed No established trend after the 25% increase in the S&P index, and as investors were waiting for American economic data Unemployment rate: 6.7% (6.6% expected) Unemployment rate: 6.7% (7% expected) Unemployment rate: 6.6% (6.7% expected) FOMC (Feb 11) Provides new qualitative guidance AMZN earnings release: -11% (44.32) +20% +146% +143% G asset Management offered to acquire 51% of B&N 0,86 0,58 48% -10% +669% +578% BKS earnings release: +4% (0.75) Crimean crisis Referendum
- 74. Beta Comparison Industry Beta Amazon’s Beta < Industry Beta Even though the debt/asset, and the Debt/equity ratio is relatively high: Amazon is a global company present all over the world Diversified goods Amazon Is the world leader in the e-commerce industry Barnes and Noble Beta > industry High debt/asset and Debt/equity ratio Less product diversification Low elasticity products but higher prices Only present in the US, and UK for digital bookstore
- 75. S&P500 AMZN BKS WMT S&P500 1.00 AMZN 0.93 1.00 BKS -0.22 -0.41 1.00 WMT 0.71 0.56 0.25 1.00 Correlation coefficient 1 year 0.93 -0.22 -0.41
- 76. RRR vs ERR Barnes and Noble ERR RRR D1 0.00Krf 0.10% P0 14.6Km 8.70% g this year 52.50%Beta 0.79 g next year 10.30% EPS (2.71) Div. Payout N/A ERR this year 1 52.50% ERR this year 2 - ERR this year avg 52.50% ERR next year 1 10.30% ERR next year 2 - ERR next year avg 10.30% RRR 6.89% This year GO FOR IT Next year GO FOR IT Amazon ERR RRR D1 0.00Krf 0.10% P0 347.46Km 8.70% g this year 240.70%Beta 0.79 g next year 112.40% EPS (0.09) Div. Payout N/A ERR this year 1 240.70% ERR this year 2 - ERR this year avg 240.70% ERR next year 1 112.40% ERR next year 2 - ERR next year avg 112.40% RRR 6.89% This year GO FOR IT Next year GO FOR IT 0% 10% 20% 30% 40% 50% 60% 0 0.2 0.4 0.6 0.8 1 1.2 Requiredrateofreturn Risk: Beta Barnes and Noble Market Security Market Line ERR this year ERR next year 0% 50% 100% 150% 200% 250% 0 0.2 0.4 0.6 0.8 1 1.2 Requiredrateofreturn Risk: Beta Barnes and Noble Market Amazon Security Market Line ERR this year ERR next year
- 77. $M 2012 2011 2012 2012 Current assets 21,296 17,490 2,047 2,007 Current Liabilities 19,002 14,896 1,715 1,797 Total assets 32,555 25,278 3,733 3,775 Total Liabilities 24,363 17,521 2,444 2,730 Working capital 2,294 2,594 332 211 EBIT 636 999 220- 55- Retained earnings 39- 631 158- 65- Market cap 113,644 78,414 1,057 784 Sales 61,093 48,077 6,839 7,129 Altman Z Score 4.82 4.87 1.94 2.05 Amazon Barnes and Noble Altman Z score Z > 2.9 -“Safe” Zone 1.23 < Z < 2. 9 -“Grey” Zone Z < 1.23 -“Distress” Zone -5% WHY?-106% -36% 29% WHY? -300% -143% BUY AMAZON -1%
- 78. $inmillions Item Coefficient B/Svalue2012 B/Svalue2011 Bankruptcy2012 Bankruptcy2011 B/Svalue2013 B/Svalue2012 Bankruptcy2013 Bankruptcy2012 Cash 1.00 8,084 5,269 8,084 5,269 160 54 160 54 OtherCurrentAssets 0.80 327 221 261 177 A/R 0.65 3,817 2,922 2,481 1,899 149 170 97 110 ShortTermInvestments 0.80 3,364 4,307 2,691 3,446 Inventories 0.60 6,031 4,992 3,619 2,995 1,411 1,562 846 937 PropertyandEquipment 0.70 7,060 4,417 4,942 3,092 585 623 409 436 Goodwill 0.50 2,552 1,955 1,276 978 495 520 248 260 OtherNon-CurrentAssets 0.50 1,524 1,388 762 694 57 61 29 31 TotalAssets 32,432 25,250 23,855 18,373 3,185 3,211 2,051 2,005 Total CurrentLiabilities 1.00 19,002 14,896 19,002 14,896 1,715 1,797 1,715 1,797 Net Cash 4,853 3,477 335 208 Total Long-TermLiabilities 1.00 5,361 2,625 5,361 2,625 728 933 728 933 Sub-Total (508) 852 (393) (725) LiquidationValue (508) 852 (393) (725) Common ShareOutstanding 453 453 58 57 Net Liquidation Share -1.12$ 1.88$ (6.74)$ (12.65)$ Amazon Barnes andnobles Net liquidation share $(1.12) $1.88 $(12.65)$(6.74) Total assets 18,81124,427 1,9402,073 $250.87 $173.10 $18.15 In case of bankruptcy, Amazon shareholders will only get 1.1% of their original investment in 2011, and 0% of their original investment in 2012 Barnes and Noble Sharholders will get nothing from the company in case of bankruptcy. They will thus lose their whole investment $13.68 Comparative Bankruptcy B/S
- 79. DEBT Bond CIR Maturity Price YTM Book Value Weight Value V Market Value Weight Value V Amazon Com 2.5% 2.50% 22.00 92.60 3.49% 1 250 0.417 1.45% 1 158 0.400 1.40% Amazon Com 1.2% 1.20% 17.00 98.90 1.50% 1 000 0.333 0.50% 989 0.342 0.51% Amazon Com 0.65% 0.65% 15.00 99.80 0.74% 750 0.250 0.19% 749 0.259 0.19% 3 000 23.54% 2.14% 2 895 1.77% 2.10% Tax rate= 40% EQUITY Shares outstanding 459 21.23 9 745 76.46% 6.52% 160 489 98.23% 6.50% 349.65 12 745 100.00% 5.28% 163 384 100.00% 6.40% Cost Krf Km Beta 0.10% 8.70% 0.79 6.89% Average 5.84% DCF Premium 2.14% 4% 6.14% 2.10% 4% 6.10% WACC Price YTM 92.60 3.49% 98.90 1.50% 99.80 0.74% But … Why BKS doesn’t have any bonds ?
- 80. Insider transactions % of Shares Held by All Insider and 5% Owners: 19% 38% % of Shares Held by Institutional & Mutual Fund Owners: 68% 62% % of Float Held by Institutional & Mutual Fund Owners: 84% 100% Number of Institutions Holding Shares: 954 170 X6Holder %Out Capital WorldInvestors 6.67 Price (T.Rowe)AssociatesInc 4.53 FMR,LLC 3.93 VanguardGroup,Inc.(The) 3.86 State StreetCorporation 3.27 Capital ResearchGlobal Investors 3.12 Baillie GiffordandCompany 2.14 BlackRockInstitutional TrustCompany,N.A. 2.05 SandsCapital Management,Inc. 1.40 InvescoLtd. 1.38 Amazon Holder %Out Dimensional FundAdvisorsLP 7.92 VanguardGroup,Inc.(The) 3.53 BlackRockFundAdvisors 3.53 TowerviewLLC. 3.34 Chesapeake PartnersManagementCoInc./Md 3.33 State StreetCorporation 2.61 Thompson,Siegel &Walmsley,Inc. 2.05 BankofNewYorkMellonCorporation 1.98 BlackRockInstitutional TrustCompany,N.A. 1.75 KingstownCapital ManagementL.P. 1.50 BarnesandNoble 9.18% 9.67%
- 81. Treasury Stocks Repurchase of 6M shares for $960M 5% Repurchase of 356k shares for $6M 27% In 2007, the company started a stock repurchase program up to $400M.
- 82. TITLE (BKS victory case)Major Acquisition Activity 2012: Kiva Systems, Inc. for $678M. -> to improve fulfillment center productivity. Goodwill: $560M 2010: Quidsi, Inc. for $545M -> operates several online stores (baby, essentials, pets, toys, beauty, home, activities, grocery, books, clothing). 2009: Zappos.com, Inc. for $1.134B. -> to expand presence in softline retail categories (shoes and apparel). Goodwil: $778M 2004: Joyo.com Limited for $75M. -> to enter the Chinese market (now Amazon.cn). Goodwill: $70M 2003: Completed the acquisition of Barnes & Noble.com (purchase of all the Bertelsmann’s membership interest for $165M to acquire 75%). Goodwill: $93M 2004: Completed a merger with Barnes & Noble.com ($156M) and became a wholly owned subsidiary. 2000: Acquisition of Funco for $168M (now GameStop, Inc. the nation’s largest video game retailer) IPO in 2003 with 64% interest. Goodwill: $36M 2004: Complete disposition of all the common stocks. 2003: Acquisition of Sterling Publishing (one of the top 25 publishers) for $123M. Goodwill: $78M 2000: Increased interests in Calendar club (operator of seasonal kiosks) from 50% to 72% for $11M 2009: Sold all its intersets. 2007: Acquired 50% of Begin Smart LLC (to develop, sell, and distribute books for infants, toddlers, and children) and the remaining 50% in 2011 2009: Completed the acquisition of B&N College for $596M. Goodwill: $274M
- 83. Employees’ Compensation AMAZON BARNES & NOBLE - Stock-Based Compensation = Based on stock price for named executive officers - Base Salaries: Cash compensation. Range from $81,840 to $175,000 - New Hire Cash Bonuses = Monthly installments. Provide appropriate total compensation - Other Compensation and Benefits: Additional compensation (vacation, medical, relocation) - Equity Compensation Plans = Enable the grant of non qualified stock options to employees, consultants, agents.. of Amazon.com - Stock- Based Compensation = Based on employee compensation. Company’s estimates include the fair value of the stock option awards granted. Using a Black-Scholes option pricing 2 significant inputs: expected volatility / expected term.
- 84. The Risks of trying to reach their Goals (Amazon) • Face intense competition (external issue) • Their expansion places a significant strain on their management, operational, financial and other resources (internal issue) • Expansion = Additional business, legal, financial and competitive risks (external issue) • Fluctuations in Growth rate: Investments plans and expense levels are based on sales estimates -> not able to adjust if sales are less than expected (internal and external issue) • Rapidly evolving business model and their stock price is highly volatile (internal and external issue)
- 85. The Risks of trying to reach their Goal (BARNES AND NOBLE) • A lot of competitors / effects of competition • General economic environment and consumer spending patterns • Low growth/declining sales compared to competition • International expansion may not be successfully achieved • Risks associated to data privacy/ Information security/ intellectual property • Increases in shipping rates or interruptions in shipping service • Inventory may be larger than able to be sold
- 86. LAWSUITS Amazon vs Customers Barnes & Noble vs Microsoft 2011 -Microsoft sued Barnes and Nobles for infringement of various patents - Barnes and Nobles’ e-readers manufacturers were also sued (Inventec and Foxconn International) -However in 2012 … “We have tried for over a year to reach licensing agreements with Barnes&Noble, Foxconn and Inventec” “Their refusals to take licenses leave us no choice but to bring legal action to defend our innovations” Horacio Gutierrez – Deputy General Counsel of Microsoft’s intellectual property and licensing Marcia Burke filed a lawsuit for breach of contract against Amazon claiming that Prime Members were being cheated Prime Members= paying $79 annually to obtain two days free shipping for each purchase Amazon pressured sellers to inflate the actual price for a product offered to Prime Members ->Amazon would recoup shipping cost that way Plaintiff demanded refund to all annual Prime Members shipping charges and damages under the Washington Protection Act Microsoft files lawsuit against Barnes&Noble Microsoft $300 million investment in Barnes&Noble
- 87. G Asset Management Previously in November 2013 : G Asset Management proposed to buy 51% of the company at $20 a share Then in February 21st, 2014 : G Asset Management proposed to buy 51% of the company at $22 a share + 51% of BKS e-book division +5.4%
- 88. Pentazon AMAZING NEWS FOR AMAZON Increase of income for AWS in the coming years $
- 89. What is it ? -> Leading e-commerce company in China (controls about 80 percent of the country's e-commerce). -> 24% owned by Yahoo, 37% by Japan’s Softbank Corp, and 13% by founders (Jack Ma) and senior managers. -> Handles more goods than Amazon and Ebay combined. -> Not an online retailer, but operates several marketplace websites B2B, B2C, and C2C (more like Ebay than Amazon). -> Extremely profitable (earns most of its revenues from advertising and commissions. - Gross Margin: 71% - Cost of revenue: 29% - ROS: 45% -> Over the Alibaba’s last four quarters, ROS: 42% -> Amazon’s ROS for fiscal year 2013: 0.37% -> Ebay’s ROS for fiscal year 2013: 18% Alibaba has around 9 times less revenues for almost $3B more earnings than Amazon -> Bloomberg analysts give a valuation of $153B (AMZN current market cap= $171B). Macquarie Group Ltd. estimated $200 billion! -> Gives us a P/E of 54 (>20) => high potential growth for earnings, expansive stock price. AMZN’s current P/E=611 (due to low earnings). -> Growth potential: The e-commerce market in China is in its early growth stage with around 618 million internet users (twice as much as the U.S.). Almost a monopoly in China (operates many websites). higher revenue growth rates and margins than all competitors. -> AMZN stockholders will sell (Amazon is currently the “king of the hill with no true competition in its own industry, but Alibaba is on the way…). Equal weight in the industry = Equal weight in portfolios. -> Will create new opportunities for investors (highly competitive company, owns an important market share, huge potential for growth and expansion after the IPO at Wall Street (easier for Americans investors to trade than in Hong Kong). -> As it is comparable to Amazon, portfolios will have to be rebalanced due to the future change in Amazon’s market share in e-commerce. -> Yahoo stock price may gain pre-IPO as they owns a part of Alibaba, but may lose after-IPO, investors may sell Yahoo (market cap: $38B) to buy Alibaba (investors will be able to directly buy Alibaba). -> Ebay stock price may suffer as well, as its core business is more similar than Amazon’s, and as its market share is insignificant compared to Alibaba’s. Profitability: 0.37% 18% 42% Yahoo stock price over 2 years: $15.54 $37.77 +143% Amazon stock price over 2 years: $202.87 $368.97 +82% Ebay stock price over 2 years: $38.08 $57.30 +50% Yahoo stock price can be used as an “anchor” for Alibaba Mon Mar 31, 2014 Alibaba agreed to invest $691M (26% stake) in a Chines department store operator (Intime Retail Co Ltd.) to form a 80-20 joint venture to develop malls, supermarkets, and stores “bricks- and-mortar stores) related to online-to-offline business (O2O). The Alibaba’s shopping spree Spent $2.8B to expand into media (Mar 12, 2014: 60% of ChinaVision Media Group Ltd. for $804M), chat services (Mar 19, 2014: 22% of the US start-up Tango for $215M), mapping technology (Feb 10, 2014: end of the acquisition of AutoNavi Holdings Ltd. for $1.4B), and logistics business (2% of Haier Electronics and 10% of its logistics unit Goodaymart to form a joint-venture logistics business).
- 90. Directed by Mary Bouchelet Executive Producers Marjorie Berthelot-Mariat Florent Benhayoun Florent Polito Pierre Gouesclou Pierre Riffard Special Thanks Amazon.com Barnes & Noble and Ebay Apple Google Microsoft Walmart IBM Yahoo Books-A-Million Alibaba Inspired by Star Wars Chuck Norris Game of Thrones The Walking Dead Music & Sounds Babil Lachheb A song of Fire and Ice Starring Marjorie Berthelot-Mariat Florent Benhayoun Florent Polito Pierre Gouesclou Pierre Riffard
- 91. Thank you for your attention Alibaba is coming….
- 92. our
Editor's Notes
- Hello Ladies and Gentlemen, Thank you for coming to our Finance 2 presentation. Previously on Finance 2’s game of mind.
- Unemployment rate : lowest level since October 2008 (before crisis)
- Even if this two companies are not in the same industry they compete in different segments. In this presentation we have two different models: -A young company with a very fast growth which is know the leader in the e-retail business -An old company that survived many crisis without declaring bankruptcy. What is interesting to see is the difference of 114 billion dollars in market cap and 2.5 times more employees when the age difference is so important. In this comparison we can determine that since it’s creation in 1994 Amazon has been way more successful than Barnes & Nobles.
- Amazon main competitors: We can see the three main actors: Apple, Walmart and Amazon. The rest have really low impact compared to these companies. 2) These are the percentages of inventory contained in the total assets. We can observe the strategies of each competitors according to this data. On one side we have the worldwide retailer Walmart that is well known for its massive inventories. Barnes and Nobles relies mainly on it’s inventory compared to amazon that relies less on inventory. We can therefore assume that BKS has more expenses related to Inventory such as employee wages, obsolescence, stocking fees, etc…..
- Major competitors of Barnes and Noble: Amazon, Apple and Books-A-Million Inc. Barnes and noble: NI= -157 806M CHIFFRES YAHOO: -210.17M Market Cap = 1 057 183,05 CHIFFRE YAHOO: 959.39M Inventory = 1 410 769,00 Amazon NI = -39 000,00 (M) CHIFFRES YAHOO: 274.00 M Market Cap = 113 644 110,00 CHIFFRES YAHOO: 163.73B Inventory = 6 031 000,00 Apple: NI = 37 037 000,00 (B) CHIFFRES YAHOO: SAME Market Cap= 460 000 000,00 CHIFFRES YAHOO: 471.85 B Inventory= 1764 000,00 Books-A-Million NI: 2 545 (Thousands) (2 545 000,00) Market Cap: 32.54 (M) (3 254 000,00) Inventory: <15,365> (T) ( 15,365 000,00)
- What is e-commerce ? Well the true question is Why e-commerce ? When doing this part on E-commerce I was thinking about how to make e-commerce understandable to all. Then I thought: “Let’s compare it to the Far West”. When you think about it corresponds accurately since e-commerce is: -Dangerous -Full of opportunities -Has few rules. But most of all entrepreneurs in e-commerce are gold seekers.
- E-commerce Is dangerous: We live in a vast world with many frontiers. The internet is without barriers and can be dangerous on many aspects. The first aspect is on the security level. Imagine the far west movies when banks are robbed easily by bandits. Well in e-commerce the bandits are hackers that are able to steal information and assets without getting caught. The best example is Anonymous who did hundreds of actions in a few years: -Data stealing. -Email Hacking. -Banking information hacking. -Actions against governments in place. These actions show how insecure the e-commerce is. Then we have black markets. These black markets sell anything you can imagine in the deep web: Drugs, weapons, humans. You are able to buy anything without many dangers. I believe this is the best example of the few rules present on the internet.
- On the pro side we have amazing opportunities on the the internet. As I said before we have each year more internet users willing to buy products without related difficulties such as movement or simply driving their cars to the shops. Everybody is using the internet: Governments, consumers and companies. Therefore the number of potential buyers have never been so important. Then we have the way of selling as shown on this graph: -Phones -Computers These ways of selling encourages the purchase of potential customers. More and more markets arise on the e-commerce: -The Asian Tigers. -The BRIC -Africa These new markets are full of customers eager to buy occidental wares.
- Now the gold of e-commerce. What are the entrepreneurs working for ? -First of all lets imagine 2.7 billions customers and more in the future years; willing to buy anywhere, anything, in several ways and at any time. Simply to avoid physical complications encountered when shopping physically. I believe that the possbilities to make money are way over what we can forecast. -But the most valuable gold remains big data: Big data is the information that the companies extract from the transactions and your way of acting on the internet. A huge amount of clique on one article can be a valuable information for companies to exploit in their marketing and selling departments. Imagine the possibility of an analysis of all the customers actions on the web and the huge information contained in such ways of acting. Simply imagine the possibility to foresee the future and shape it at will. Isn’t that the best gold of all ?
- BKS : partnership with Microsoft Amzn : We strive to offer our customers the lowest prices possible through low everyday product pricing and shipping offers, including through membership in Amazon Prime, and to improve our operating efficiencies so that we can continue to lower prices for our customers. We also provide easy-to-use functionality, fast and reliable fulfillment, and timely customer service. Barnes & Noble’s strategy is to: (2012) • continue to invest in the digital business to fuel NOOK and content sales; • use its infrastructure to deliver digital content to cus- tomers wirelessly and online; • utilize the strong Barnes & Noble brand and retail foot- print to attract customers to its multi-channel platform; and • expand its distribution channels through strategic partnerships with world-class hardware and software companies and retail partners. The company invested heavily in the Nook business in an effort to move away from physical books 2013 : utilize the strong Barnes & Noble brand and retail foot- print to attract customers to its multi-channel platform; • expand its distribution channels through strategic partnerships with world-class hardware and software companies and retail partners; • drive content sales through the web, NOOK® Readers and 3rd party devices; • use its infrastructure to deliver digital content to cus- tomers; and • continue to grow campus partnerships including store locations and students served while continuing its investment in the digital higher education business
- Focus more on their own structure, they are not as competitive as Amazon They invest in order increase sales so their goal to improve their cash cash equivalent… As they are more focused on their own structure, I choose to show you numbers from their capital expenditures rather than cash using from investing activies as they are almost only improving and building new stores.
- Star product: need heavy investments to finance their rapid growth. Question mark: amazon has no question mark product, because these are products that need a lot of cash in order to be financed, and which don’t generate a lot of revenues for the company. Cash cow products: low investment for the firm, and high return Dog products: low investment but low return
- Pressure to return to profitability may impact bad business, or management decision BKS cannot operate indefintly at a loss
- This is the worldwide presence of Barnes & Nobles and Amazon. Let’s start by BKS. 2 presences: -US Bookstores and college bookstores -UK Digital online shop for the NOOK Concerning amazon: Worldwide presence: -14 customer services -13 Development centers -59 fulfillment centers -13 Corporate offices -And 2 databases
- Where do you invest ? Nook can offer same products to a lower price : INVEST IN THE NOOK PPI = Pixel per inch Sales in the NOOK segment declined year-over-year largely because during the previous holiday season the company introduced two new tablet products, while no new tablets were introduced this year,” said Michael Huseby, Barnes & Noble’s new chief executive, in a statement. “Instead, we executed our plan to sell through our existing high-quality devices.” Sales declined because Amazon eBook prices are more competitive and attractive. For example for the same eBook, the Nook proposes a price almost twice higher. The Goldfinch a Donna Tartt’s book is at $14.99 with a Nook and $7.50 with an Amazon Kindle
- Les 2 + chères MOST EXPENSIVE Kindle Fire HDX 8.9", HDX Display, Wi-Fi and 4G LTE: 64 GB Nook HD+: $179 les 2- moins chères Les 2 plus vendues Kindle Fire HD 7”: $154 (8 Gb) NOOK?? Parler du fait que les livres sont en général + chers sur Nook que Kindle Sales in the NOOK segment declined year-over-year largely because during the previous holiday season the company introduced two new tablet products, while no new tablets were introduced this year,” said Michael Huseby, Barnes & Noble’s new chief executive, in a statement. “Instead, we executed our plan to sell through our existing high-quality devices.” Sales declined because Amazon eBook prices are more competitive and attractive. For example for the same eBook, the Nook proposes a price almost twice higher. The Goldfinch a Donna Tartt’s book is at $14.99 with a Nook and $7.50 with an Amazon Kindle
- While our NOOK® business experienced a shortfall due to an over-estimation of holiday customer demand, we have sold 10 million devices to date and remain as committed as ever to delivering the best black-and-white and color eReaders on the market. Losses in our NOOK segment were higher than expected, mainly due to the shortfall in new product holiday sales for HD and HD+ tablets. Nonetheless, we remain committed to offering customers the best digital bookstore experience as we look to reduce NOOK losses. The Company will continue to sell its existing device inventory through reduced and promotional pricing. Also contributing to the increase was higher occupancy costs on increased office space in Palo Alto, CA , partially offset by a higher mix of higher margin content sales. NOOK sales decreased $153.0 million, or 16.4%, to $780.4 million during the 52 weeks ended April 27, 2013 from $933.5 million during the 52 weeks ended April 28, 2012. This decrease was primarily due to lower device unit volume and lower average selling prices, partially offset by higher content sales. Digital content sales increased 16.2% during the 52 weeks ended April 27, 2013.
- Sync : Whispersync allows you to synchronize any books, audiobooks, personal documents, games, and Amazon Instant Video across supported Kindle devices and apps. Cloud Player : Buy music from Amazon and stock imported music from the computer ; 250 titles for free; or pay 25€ to get up to 250,000 titles Cloud Drive : Stock photos, videos and any other documents Elastic compute cloud : Use of computing resources Nook Cloud : All products bought through BNS or Nook are stocked, only available on Nook
- What is great with amazon is that this company is the leader of the industry and therefore does not really require any advertising to be know threw the world. Therefore they can allow themselves to advertise for other companies on their website. They have to ways of proceeding: -Product Ads: Consists in putting an ad on their website and charging the company a fee per click on the ad. -Media group: Consists in putting the product on their website and taking a fee on the sale of the product.
- So they need distribution and warehouses in the world.
- We expect our net cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate, our product mix shifts to the electronics and other general merchandise category, we reduce shipping rates, we use more expensive shipping methods, and we offer additional services. We seek to mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing placement of fulfillment centers, negotiating better terms with our suppliers, and achieving better operating efficiencies. We believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers.
- Amazon Premium or Prime is one of their major advantages against the competition Amazon Premium is an agreement between Amazon and it’s customers. BY paying a $49 fee to amazon the customer becomes an advantaged member of the amazon circle. The customers earns: Acces to Kindle Library. Price reduction. Quick delivery. -Share with family members. But what is in for Amazon ? Well amazon garantees itself: -Loyal customers. -Steady revenue. Spread their influence.
- Amazon has a very diverse activity: -Step 1: Act as a retailer. -Step 2: Retail other retailers for comissions. -Step 3: Works in the seller market (comissions). -Step 4: Web service (No inventory).
- PAYING WITH A CREDIT, DEBIT, OR GIFT CARD USING SHOP WITH POINTS AMAZON CURRENCY CONVERTER CHECKING ACCOUNT AMAZON PAYMENTS (on amazon.com) INVOICES LINK for explanation: http://www.amazon.com/gp/help/customer/display.html?nodeId=201132710 Because consumers primarily use credit cards to buy from us, our receivables from consumers settle quickly. (p 22) operating cash flows result primarily from cash received from our consumer, seller, and enterprise Customers (p 22)
- Majority of Offices E-retail All the leases started in 2013 according to the annual report, Clearly shows the expansionary policy of Amazon. We can see that 97% of their square footages are leased. Therefore we can assume that Amazon does not want to buy assets that could be obsolete or unnecessary in a few years. Can we therefore suppose that they are uncertain about their future and where they will be in a few years ? Do they fear to be unable to support their assets in the years to come ? I think that this shows that they are planning to have a negative net income a few years.
- We can see their e-retail business strategy in their square footages. Only 73% of their offices are leased when 99% of their fulfillment, databases and others are leased.
- This is the constitution of their leases threw the upcoming year. We can see that their capital leases are falling and that their operating leases remain stable. The most interesting thing to see in the thereafter that shows us their strategy for the future: Reduce capital lease and therefore avoid to show these transactions as liabilities for the company and focus on operating leases.
- P 14-15 annual report By April 27, 2013 B&N Retail $ 4,568,243 B&N College 1,763,248 NOOK 780,433 Elimination (272,919) Total Sales $ 6,839,005 By April 28, 2013 B&N Retail $4,852,913 B&N College 1,743,662 Nook 933,471 Elimination (400,847) Total Sales $ 7,129,199 Depreciation and Amortization April 27, 2013 B&N Retail $148,855 B&N College 46,849 NOOK 31,430 Total $ 227,134 April 28, 2012 B&N Retail B&N College NOOK Total
- This is a general overview of Amazon’s strategy. Amazon is the actual leader of the online retailing sector but it’s ambition does not stop here. Amazon is massively investing and expanding in new sectors that are dominated by huge companies. -Google with the web services. -Apple with the downloadings and readers. -Walmart with the massive retail. In this presentation we will show the different aspects of this risky but promising strategy. Quote: -”Many of our current and potential competitors have greater resources, longer histories, more customers, and greater brand recognition. They may secure better terms from vendors, adopt more aggressive pricing and devote more ressources to technology, infrastructure, fulfillment, and marketing.”
- Retailers : Physical-world retailers, publishers, vendors, distributors, manufacturers, and producers of their products E-commerces : Online e-commerce and mobile e-commerce sites, sites that sells or distributes digital content E-services : E-commerce services, including website development, fulfillment, customer service, and payment processing Information storage : Information storage or computing services or products Media companies : media companies, web portals, comparison shopping websites, and web search engines, either directly or in collaboration with other retailers Electronic devices : Companies that design, manufacture, market, or sell consumer electronics, telecommunication, and media devices
- During the fourth quarter of fiscal 2008, the Company committed to a plan to dispose of its approximate 74% interest in Calendar Club. Calendar Club qualified for held for sale accounting treatment in fiscal 2008 and was written down to its fair value. The results of Calendar Club have been classified as discontinued operations in all periods presented.
- Amazon has a negative CCC which implies that they receive their cash 79 days before
- Amzn: On average, our high inventory velocity means we generally collect from consumers before our payments to suppliers come due. We expect variability in inventory turnover over time as it is affected by several factors, including our product mix, the mix of sales by us and by other sellers, our continuing focus on in-stock inventory availability and selection of product offerings, our investment in new geographies and product lines,
- This is a good thing to see a decling as it means that analysts moved from buy to strong buy
- Analysts are still pessimist concerning the BKS stock as the ratio is very high.
- Here is the comparative 1 day Income statement, which takes all the Income statement data divided by 360 to get a daily, more concrete point of view of the companies. First appealing thing is that Amazon’s net sales are 9 times bigger than Barnes and Noble with sales for Fiscal year ending in 2012, which affirms a big difference in scale The two companies cost of good sold is 75% which is high, but understanding as Amazon “strives too offer their customers the lowest prices possible throught low everyday product pricing and shipping offers. For Barnes and Noble the high cost of good sold is explain by the fact they purchase their products from their supplier at a much higher price than Amazon. The high amount of cost of good sold is principally due to an increase from 92.7% to 115.7% of the Nook Cost of sales. This increase was attributable to additional inventory related charges explained by a loss due the holiday sales shortfall. As a result, the gross margin of the two companies is 25% due to the high level of cost of sales. Concerning Selling and admin expense, For Barnes and Noble it is principally due to decreased sales, the impairment of goodwill and increased costs to support international expansion. And for Amazon: the increasse in general and admin exp is primiraly due to increase in payroll and related expenses, and professional service fees. The net income per day for those two companies is negative
- The drecrease of Barnes and Noble is due to a decrease of their cost of Good sold in their 3 principal sector of activities : B&N retail :This decrease was attributable to a higher mix of higher margin core products and increased vendor allowances. B&N College : due to a higher mix of higher margin textbook rentals, partially offset by increases in occupancy associated with contract renewals. For amazon the 23% increase of their COSG is due to a 19% increase of their inventory. In their annual report they states that for every 1% of addinal inventory, Amazon records an additional cost of sales of $60Million EBIT= even with a 36% decrease, Amazon still generates 636M of Income before paying Interests and taxes. Equity method investment activity: Amazon bought in March 2011 29% of LivingSocial which is a « deal of the day » website that features discounted gift certificates usable at local or national companies, and which account more than 70M members. It is like “groupon”, and the amount of the purchase is $175 Million
- Inventoy 4X higher for AMZN, but reprensents only 19% of the total assets
- Long term debts: 0.65% Notes due on November 27, 2015 1.20% Notes due on November 29, 2017 2.50% Notes due on November 29, 2022 Treasury stock: Amazon repurchased 6M shares for a total amount of $960M between 2011 and 2012 B&N repurchased 356K shares for a total amount of 6M between the two years. Th repurchase program will be seen more in detail with the treasury slide that is coming
- Treasury stock: -Try to make the price of the stock increase because they issue new common stocks and do not want the price of the share to fall -Also tries to stabilize the EPS of the stock that is negative. -They believe that their stock is underavluated
- AMZN: In December 2012, we acquired our corporate headquarters for $1.2 billion consisting of land and 11 buildings that were previously accounted for as financing leases. We also acquired three city blocks of land for the expansion of our corporate headquarters for approximately $210 million. BKS: The decrease in cash flows from operating activities in fiscal 2012 from fiscal 2011 was primarily attributable to increased device and accessory inventory levels and changes in deferred taxes. Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory.
- BKS: The decrease in cash flows provided from operating activities were primarily due to lower earnings as a result of negative comparable store sales. Capital expenditures planned for fiscal 2014 primarily relate to the Company’s digital initiatives, build-out of its Palo Alto facilities, new stores, eCommerce improvements, maintenance of existing stores and system enhancements for the retail and college stores. expand its distribution channels through strategic partnerships with world-class hardware and software companies and retail partners; use its infrastructure to deliver digital content to customers; AMZN: Our financial focus is on long-term, sustainable growth in free cash flow. The decrease in free cash flow in 2012 and 2011, compared to the comparable prior year periods, was primarily due to increased capital expenditures partially offset by higher operating cash flows. Operating cash flows and free cash flows can be volatile and are sensitive to many factors, including changes in working capital, the timing and magnitude of capital expenditures, and our net income.
- the Committee stated that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored (figure 41). The Committee emphasized that these criteria are thresholds, not triggers, meaning that crossing a threshold will not lead automatically to an increase in the federal funds rate but will indicate only that it is appropriate for the Committee to consider whether the broader economic outlook justifies such an increase. the Committee indicated that in determining how long to maintain a highly accommodative stance of monetary policy, it will consider not only the unemployment rate but also other indicators, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. Further, the Committee stated that, based on these factors, it continues to anticipate that it will likely be appropriate to maintain the current federal funds rate target well past the time that the unemployment rate declines to below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal. May increase the Fed funds rate target earlier than expected (beginning 2015)
- The BKS beta increased these last weeks from 0.79 to 1.13 BKS is touched more intensively by crisis : such as gov shutdown in sept/oct 2013
- Predict the probability that a firm will go into bankruptcy within two years We can see here that bks is in the middle range (the grey zone) which means that even though the company is out of crisis zone, it is higly recomended to take precautionary steps and keep tab of the figures to avoid bankruptcy. On the other hand, AMZN is in stable conditions, and the chance of bankruptcy is small with the current value Conclusion : BUY AMAZON
- Now here’s the bankruptcy balance sheet for our companies, which is a simulation of a bankruptcy and permits to evaluate whether the shareholders would benefit from the company’s bankruptcy. So First of all, I would like to point out that we chose to put 0.6, as a bankruptcy coefficient for inventories, because amazon does no sell consuption product, which means both companies would sell their inventories at a 40% discount. AMZN sells products they would like to get rid off rapidly in case of bankruptcy because these products are expensive to stock. Amazon ends with a net liquidation per share of 14 cents in 2012, and $2.85 in 2011. For Barnes and Noble, The sales of all its assets would not cover their debt; therefore shareholders would not earn anything from the company’s bankruptcy. Then, since Amazon Share price as of the end of 2012 was $250.87, shareholders’ remuneration would only represent 0.05% of this price. In 2011, it shareholders’ remuneration represented 1.6%
- AMZN has 3 expensive bonds because they want to expand and they know they will be able to pay back as they expect to grow; moreover they sell it at a discount so the yield is higher; AMZN bonds are rated AA-; on a stratetic point of view, Jeff Bezos must not want to issue stocks instead of bonds because it would lower its influence on the company (possesses 19.34% of the company) BKS has 490M in Cash so they must not need to raise cash for the moment; if it had a need for cash it would more probably issue stocks because they can still issue 2/3 or their stocks authorized. Also BKS has performed well last year.
- Those 3 institional holders detain…
- BKS: On May 15, 2007, the Company’s Board of Directors authorized a stock repurchase program for the purchase of up to $400,000 of the Company’s common stock. The maximum dollar value of common stock that may yet be purchased under the current program is approximately $2,471 as of April 27, 2013. Stock repurchases under this program may be made through open market and privately negotiated transactions from time to time and in such amounts as management deems appropriate. As of April 27, 2013 the Company has repurchased 34,078,089 shares at a cost of approximately $1,063,854 under its stock repurchase programs. The repurchased shares are held in treasury.
- AMZN: Zappos: one of the largest online shoe and cloth store Kiva: makes order fulfillment systems, which use mobile robots for warehouse automation. In 2004, we acquired all of the outstanding shares of Joyo.com Limited, a British Virgin Islands company that operates an Internet retail website in the People’s Republic of China (“PRC”) in cooperation with a PRC subsidiary and PRC affiliates, at a purchase price of $75 million, Amazon.com acquired Quidsi, Inc., which operates Diapers.com and Soap.com, for $550 million on November 8, 2010 (largest online specialty retailer for baby products + essentials, pets, toys, beauty, home, activities, grocery, books, clothing.) BKS: On September 15, 2003, the Company completed its acquisition of all of Bertelsmann’s interest in Barnes & Noble.com. The purchase price paid by the Company was $165,406 (On November 12, 1998, the Company and Bertelsmann AG (Bertelsmann) completed the formation of Barnes & Noble.com to operate the online retail bookselling operations of the Company’s wholly owned subsidiary, barnesandnoble.com inc. (bn.com). Under the terms of the relevant agreements, effective as of October 31, 1998, the Company and Bertelsmann each retained a 50 percent membership interest in Barnes & Noble.com. ) On May 27, 2004, the Company completed a merger (the Merger) pursuant to which Barnes & Noble.com became a wholly owned subsidiary of the Company. The purchase price paid by the Company in the Merger was $158,776 (including acquisition related costs). On January 21, 2003, the Company completed its acquisition of Sterling Publishing, one of the top 25 publishers in the nation and the industry’s leading publisher of how-to books, for $122,593 In fiscal 2000, the Company invested $11,000 to acquire a controlling interest in Calendar Club by increasing its percentage ownership interest to 72 percent. Accordingly, the Company has consolidated the results of operations of Calendar Club. Prior to fiscal 2000, the Company held a 50 percent interest in Calendar Club and accordingly accounted for its investment under the equity method and reflected it as a component of other noncurrent assets. In fiscal 2004, the Company’s Board of Directors approved an overall plan for the complete disposition of 2004 Annual Report [ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued ] Barnes & Noble, Inc. 11 all of its Class B common stock in GameStop Corp. (GameStop), the Company’s Video Game operating segment. This disposition was completed in two steps. The first step was the sale of 6,107,338 shares of GameStop Class B common stock held by the Company to GameStop (Stock Sale) for an aggregate consideration of $111.5 million. The Stock Sale was completed on October 1, 2004. The second step in the disposition was the spin-off by the Company of its remaining 29,901,662 shares of GameStop’s Class B common stock (Spin-Off).
- A lot of competitors / effects of competition General economic environment and consumer spending patterns Low growth/declining sales compared to competition International expansion may not be successfully achieved Risks associated to data privacy/ Information security/ intellectual property Increases in shipping rates or interruptions in shipping service Inventory may be larger than able to be sold See p. 27 “Disclosure regarding forward-looking statements”
- +18% since 2014
- Last week Google started a price cutting war on it’s cloud service. Soon after Amazon entered the game followed by Microsoft. Consequence: They will have lower returns in the future. On the other hand this is a danger for companies who does not have any other type of business except the cloud such as IBM. Competition is coming on the cloud and it is to watch carefully in the years to come.
- The deal calls for the two companies to set up a joint-venture logistics business, bringing together Alibaba’s huge online retailing platform and client network with Haier’s logistics unit, Goodaymart, which has an especially strong presence in China’s smaller inland cities and provinces. Valuation according to GS: $150B