Rochester Institute of Technology September 23, 2011 Kuldeep Shah Mayank Bindal.

Financial Management Association

Rochester Institute of TechnologySeptember 23, 2011

Kuldeep ShahMayank Bindal

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Many of the phrases, tables and graphs usedin this presentation have been cribbed fromsome or all of the following sources: 10‐K, 10‐Q, Thomson, Hoovers, Mergent Online, YahooFinance, S&P online research documents. Thispresentation is intended to synthesize thesesources so that they can be used to analyze aspecific company.

Financial Management Association September 23, 2011

Disclaimer

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Company Overview

Industry Analysis

Ratio Analysis

SWOT Analysis

Valuation

Recommendation

Agenda

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Opened “Earth’s Biggest Bookstore” in July95, with virtually

unlimited shelf space

Expanded into almost all every retail category

Allows other individuals and businesses to sell products for fixed

fees/sales commission

Manufactures and sells e-book reader Amazon Kindle

Provides technology infrastructure through Amazon web services

55% of sale from North America, 45% International (2010)

44% media products, 53% electronics & general merchandise, and

other 3%

Company Overview

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Expected Launch – Thanksgiving Price comparable to iPad $499 to $829 Double as tablet

Kindle

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Full-fledged tablet running Android OS

Multi touch with color display

UI custom designed by Amazon

Price same as NOOK by Barnes & Noble and $200 less than RIM

PlayBook

Books delivered in under 60 seconds

Long battery life

Larger selection

Kid friendly

AMZN Kindle SWOT AnalysisStrengths

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No Google apps

No access to Google's Android Market

Multi-touch restricted to two fingers only

No camera

Only 6GB storage

Wi-Fi only

Cannot share content

AMZN Kindle SWOT AnalysisWeaknesses

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Amazon's Cloud drive, Instant video streaming & MP3 store already in

place

Preferred by age group - 50 years +, yet, big hit with universities and

schools

This age group accounts for almost 33% of the US population

LINUX Open Source OS for developers

Text-to-speech: Read textbooks to you

Audio books big business

Amazon already offers DRM-free music

Established relationships with record companies, movie studios,

publishers etc. = great content available on the new Kindle

AMZN Kindle SWOT AnalysisOpportunities

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Source code released

Featured apps not given enough time to rake in the cash

Price - can buy Netbook in the same amount (more features)

AMZN Kindle SWOT AnalysisThreats

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Amazon Web Services

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Amazon Web Services (AWS) is the focus of the company’s cloud computing efforts, providing computing power, data storage, applications and more in Amazon’s data centers that users access via the Internet, or cloud

Analysts say AWS will soon bring in $1 billion in annual sales for Amazon, roughly matching the sales of Amazon’s popular e-reader, Kindle

AWS earned Federal Information Security Management Act (FISMA) Moderate Authorization and Accreditation, expanding the AWS Security and Compliance framework

AWS solution provider and reseller URS-Apptis was awarded an Infrastructure-as-a-Service blanket purchase agreement (BPA) from the U.S. General Services Administration (GSA)

Government agencies can now easily procure on-demand, highly reliable, highly scalable, and cost-efficient technology resources using the GSA IaaS BPA

Amazon Web Services LLC (AWS)

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Capital intensive – technology, IP and supply chain - $1Bn CAPEX in 2010

Huge breadth and depth of product lines Customer trust and first mover advantage (user feedback system) Amazon Ranked 2nd most valuable U.S. General retailers in 2011

by Financial Times Low switching costs for customers when shopping online

Biz Dynamics

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Only about 8% of total U.S. retail sales were estimated to be e-

commerce transactions – 2010

Anticipated e-commerce share to be 11% by 2015 - $279 Bn

Internet penetration in US 76% Vs Global 27%

Industry Analysis

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Porter’s Five Forces

Low Competitive pressure

Industry Rivalry-Enough leg room- Vendor base- Supply chain

Threat of Substitutes- Kindle 2nd mover- Other cloud

computing players

- E-bay and othersCustomers- High bargaining

power- Low switching

costs

Suppliers- Low bargaining

power- High dependency

New Entrants- Capital intensive- Oligopolistic

market- Vendor

relationships

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AMZN Vs S&P500 Vs EBAY

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Key Financials

Market Cap 101.33 BnEnterprise Value 94.98 BnBeta 0.90Trailing P/E 98.47Forward P/E 69.54PEG (5 yr expected) 4.25Price/Sales 2.52Price/Book 13.05Enterprise Value/Revenue 2.36Enterprise Value/EBITDA 51.98

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Net Sales

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Earnings Quality

Source: Jefferson Research

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Cash Flow Quality

Source: Jefferson Research

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Operating Efficiency

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Operating Efficiency

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Balance Sheet Quality

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Valuation Ratios

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Valuation Ratios

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We recommend to BUY 9 shares of Amazon.com Inc. on Sep 23, 2011 based on the information we have gathered and our resulting research, we feel that AMAZON.COM INC has the probability to OUTPERFORM average market performance for the next year. The company exhibits ATTRACTIVE company size, risk and 5-year annualize return.

Recommendation - BUY