Amazon Soars on Wal-Mart Rumor
Stock of Amazon.com
The stock was at $12.50 just after the opening bell, up from a Friday close
of $10.
The news of a possible alliance with Wal-Mart Analysts at Goldman, Sachs advised clients that such a partnership "could
fill key voids or limitations in Amazon's business by broadening its appeal
and improving the economics of
its model."
"We would view these partnerships favorably and believe that Amazon shares
shares are attractive for long-term investors, GS said. The analysts
reiterated their market outperform rating for Amazon.
The Times said in its report that Amazon's founder, Jeff Bezos, and Lee
Scott, Wal-Mart's chief executive, are in talks for a deal that might be
announced within several months.
"We do not confirm or deny rumors or speculation about what we may or may not
do in the future," said Amazon spokesperson Patty Smith.
Amazon would become Wal-Mart's e-commerce supplier and Wal-Mart would gain
access to the e-tailer's expertise in managing an Internet retail operation,
from online ordering to home delivery, the newspaper said. With total
fourth-quarter sales topping $56.5 billion, Wal-Mart is the largest retailer
in the world and operates its own Web site at walmart.com.
Amazon also would gain a presence in Wal-Mart's 4,500 stores, a cash
injection and a percentage of the sales it makes through Wal-Mart, the Times
said.
The e-tailer, struggling to get into the black, announced in January that it
was laying off 1,300 workers, or 15 percent of its staff.
Goldman, Sachs said that "given the current decelerating outlook for
e-commerce growth, the impact of (such partnerships) has become increasingly
important...as a vehicle to offset the slowing environment."
"In theory, Amazon can leverage its existing assets (technology expertise,
large customer base, and global brand awareness) to create partnerships that
allow it to enter new categories or accelerate progress in existing
categories to cast the widest net of awareness and still own the consumer."
There are a variety of different categories that make sense for Amazon to
pursue either in the near-term or the long- term, GS said, including
groceries, apparel, HBA (health, beauty, and accessories), sporting goods,
consumer electronics and other big-box retail categories.
And there would be cost-saving opportunities, too. GS said that Amazon might
gain the ability to directly source its merchandise, buying direct from
manufacturers, as well as reducing its marketing and promotional expenses.
soared 25 percent in the first minutes of
trading today on reports that it may be in negotiations for an e-commerce
alliance with Wal-Mart Stores Inc. The concept drew a positive reaction from
market analysts.
was reported in the
UK's Sunday Times and was attributed to an unnamed executive. Both companies
declined to comment on the report.