Marjorie Berthelot-MariatFlorent BenhayounFlorent PolitoPierre GouesclouPierre Riffard

US Overview

US Overview

Player Characteristics

Sector: Service

Industry: Electronic retail

Quote: AMZN

Market Capitalization: 114 Billion

Fiscal year: December 31

Founded: 1917Charles and Williams Barnes

G. Clifford Noble

Employees: 88,400

Sector: Service

Quote: BKS

Market Capitalization: 1 Billion

Industry: Retail

Fiscal year: April 27

Founded: 1994Jeff Bezos

Employees: 34,000

114

$114 Billion $1 Billion

77 Years 19171994

2.588,400 34,000

BE THE WORLD’S SUPPLIER

-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%

-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)

E-Commerce

Why E-commerce ? What is

DangerousFull of opportunities

Few rules

GOLD

Dangerous & few rules

HackersBlack markets

2.7 Billion internet users

Impossible to control every virtual transactions

Opportunities

Everybody is on the internet…

Governments

Consumers

Companies

…and buys everything

Gold of the E-commerce

Big Data:

Retail

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

Common strategies

•Cost-conscious culture : #1 motive for AMZN : guarantee the lowestprices (Sell premium hardware at breakevenprices)

•Maximizing the presentvalue of future cash flows

•Satisfied or reimbursedservices

•Customer-driven focus

•Focus on growth

•Long-term investments

•Develop digital content

•Develop partnerships with hardware/ software/ retailerscompanies (Microsoft)

•Maintain relationship with colleges and universities

•Innovation (Nook)

•Attract customers to the multi-channel platform

The Strategies

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%

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%

Portfolio analysis

Star

DogCash cow

Question marks

E-book (Kindle)Music Download

Amazon on demandOnline book salesOnline consumer goods

HIGH

HIG

H

LOW

LOW

Relative market share

Mar

ket

gro

wth

rate

Swot Analysis Amazon

Strenghts Weaknesses

Threats Opportunities

Customer serviceDiverse product offeringConstantly evolving

SeasonalBrick storesE-commerce Maturing

Free shipping = profit lossBrand confusion

Global expension (BRIC)Video on demandKindle segment

Swot Analysis Barnes and Noble

Strenghts Weaknesses

Threats Opportunities

Store locationStrong web presenceNewest Nook HD is verycompetitive= low price

Lot of competitionSignificant cost to maintantphysical storesPressure

Lose moneyRapid change in digital technologies

Partnerships with MicrosoftInternational presence withnook mediaGross for the BKS collegesection

Geographical Overview

Population percentages of internet uses675 stores686 College bookstores

14 Customer services13 Development centers59 Fulfillment centers13 Corporate Offices

Data base

U.K. Digital bookstore

Data base

Did you know?

All these companies belong to Amazon

Product differenciation

Kindle vs. NOOK

KINDLE NOOK

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 processor2. eBooks at low prices3. 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. PRICE2. More content to use 3. More pixels/ inch4. Expandable memory

KINDLE VS. NOOK

WINNER!!

LOSER!!

$ 154 $ 129

Tablet market

25%

75%

% of tablet's use

NorthAmerica

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%

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 NOOKBUT

-> 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

Cloud war

Elastic Compute Cloud

Whisper Sync.

Cloud drive

Amazon Instant video

Amazon Cloud player

Whysper Sync : Enables customers to follow their documents, moviesthroughout any device.

Amazon Instant Video : Enables customers to resume their movie on a differentdevice 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 computingresources they are using

Nook Cloud

A cloud where all products boughtthrough BNS or Nook are stocked

WINNER!! LOSER!!

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…

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

Advertising

Ads on the website that link to your own website Cost per click fee

Attracting source of revenue for Amazon

The real problem…

Warehouses

Distribution

In the World

Amazon: Shipping Activity

+47%

+29%

+17%

Reduce shipping ratesMore expensive

shipping methodsOffer new shipping

services

Optimizing fulfillmentNegotiating better

termsIncreasing 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

Amazon Premium

$

Quick deliveryAccess to Kindle libraryPrice reductionShare

WHY ?Steady Revenue

Loyal Customers

Spread their influence

S

trategyStep 1: Act as a retailerStep 2: Retail retailersStep 3: Sellers MarketStep 4: Amazon Web service

Less inventory

Commissions

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

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 NookMedia

August. 2011: Liberty purchased 204,000 shares of

the company’s preferred stock.

Par value/ share = $0.001Price = $204 million

Nook has developed and distributed a Windows 8

application for e-reading + intellectual property licenseand settlement agreement

with Microsoft.Price : $60 million/year from

Microsoft

Owns 16.8% of Nook

Commercial agreement : Nook distributes Pearson

content

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

Amazon square footage

3%

53%

0%

44%

Square footage

Owned NA Leased NA Owned Int Leased Int

Offices9%

Warehouses + others

91%

Square Footage

97%

Amazon square footage

Owned Office space27%

Leased office space48%

Leased office space25%

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%

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

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

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

Barnes & Noble’s Competitor

Nook devices and accessories

Toys and Games

Ecommerce Website

Books

Books-A-Million Amazon- KindleApple- iPad

Toys “Я” us

AmazonBooks-A-Million

2 major competitors:

AMAZON & BOOKS-A-MILLION

Amazon’s Competitors

•Apple•Microsoft

•Ebay•Walmart

•Google•Yahoo

•Barnes and Noble•Books-A-Million

•Paypal•Dell•IBM

•Walmart•Target

Media companies

Retailers

E-services

Book

E-commerces

Electronicdevices

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 companies AAPL, 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 debtsAMZN, 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.

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

-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 salesHuge fall in NI and EPS

Sales globally decreasing EPS 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%

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%

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

-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.

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 exp4%NI 129%

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 INCREASEDSALES INCREASED

NI “STABLE”

Almost NO VARIATIONS

NI became NEGATIVEA slightly increasedSales slightly increasedE 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%)

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

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%>

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 BKSRATIOS

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%

-291413.87

Stock price not expensive + Negative Earnings

-12.1-6.70.82

High PE -> High potential for

growth

Stock very expensiveNegative and

insignificant earnings

124The 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:

AMZNis 67% BETTER

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

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

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

$ 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%

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%

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

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%

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

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

2.33.6

23.3

1.3

$ 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

($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

($M)

Period Ending Dec 31 2012 % Dec 31 2011 % V V% Apr 27 2013 % Apr 28 2012 % V V%

Cash And Cash Equivalents 8,084 25% 5,269 21% 2,815 53% 160 4% 54 1% 106 196%

Short Term Investments 3,364 10% 4,307 17% (943) -22%

Net Receivables 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%

Deferred tax 453 1% 351 1% 102 29% 327 9% 221 6% 105 48%

Total Current Assets 21,296 65% 17,490 69% 3,806 22% 2,047 55% 2,007 53% 40 2%

Property Plant and Equipment 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%

Intangible Assets 548 15% 564 15% (16) -3%

Other Assets 1,524 5% 1,388 5% 136 10% 57 2% 61 2% (4) -7%

Deferred Long Term Asset Charges 123 0% 28 0% 95 339%

Total Assets 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

($M)

Period Ending Dec 31 2012 % Dec 31 2011 % V V% Apr 27 2013 % Apr 28 2012 % V V%

BKSAMZN

Accounts Payable 13,318 41% 11,145 44% 2,173 19% 805 22% 863 23% (58) -7%

Other Current Liabilities 5,684 17% 3,751 15% 1,933 52% 910 24% 933 25% (23) -2%

Total Current Liabilities 19,002 58% 14,896 59% 4,106 28% 1,715 46% 1,797 48% (81) -5%

Long Term Debt 3,084 9% 255 1% 2,829 1109% 77 2% 324 9% (247) -76%

Other Liabilities 2,277 7% 2,370 9% (93) -4% 420 11% 367 10% 53 15%

Total Liabilities 24,363 75% 17,521 69% 6,842 39% 2,444 65% 2,730 72% (287) -10%

Common Stock 5 0% 5 0% 0 0% 0 0% 0 0% 0 2%

Retained Earnings 1,916 6% 1,955 8% (39) -2% 410 11% 586 16% (176) -30%

Treasury Stock (1,837) -6% (877) -3% (960) -109% (1,064) -29% (1,058) -28% (6) -1%

Additional paid-in capital 8,347 26% 6,990 28% 1,357 19% 1,384 37% 1,341 36% 43 3%

Accumulated other comprehensive Loss (239) -1% (316) -1% 77 24% (17) 0% (17) 0% (0) 0%

Total Stockholder' Equity 8,192 25% 7,757 31% 435 6% 1,289 35% 1,045 28% 244 23%

Total Liabilities and Stockholders' 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

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 decrease Stabilization

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

($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 Amazon Amazon 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 CASHTO EXPAND ITS ACTIVITIES

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

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-termHuge 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

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

Stock Price Comparison YTDS&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 FedNo 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

0,860,5848%

-10%

+669%

+578%

BKS earnings release: +4% (0.75)

Crimean crisis

Referendum

Beta Comparison

Industry Beta

Amazon’s Beta < Industry Beta

Even though the debt/asset, and the Debt/equity ratio isrelatively high:

Amazon is a global companypresent 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/equityratio

Less product diversification

Low elasticity products but higherprices

Only present in the US, and UK for digital bookstore

S&P 500 AMZN BKS WMT

S&P 500 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

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

Re

qu

ire

d r

ate

of

retu

rn

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

Re

qu

ire

d r

ate

of

retu

rn

Risk: Beta

Barnes and Noble

Market

Amazon

Security Market Line

ERR this year

ERR next year

$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” Zone1.23 < Z < 2. 9 -“Grey” ZoneZ < 1.23 -“Distress” Zone

-5%

WHY?-106%

-36%

29%

WHY?-300%

-143%

BUY AMAZON

-1%

$ in millions

Item Coefficient B/S value 2012 B/S value 2011 Bankruptcy 2012 Bankruptcy 2011 B/S value 2013 B/S value 2012 Bankruptcy 2013 Bankruptcy 2012

Cash 1.00 8,084 5,269 8,084 5,269 160 54 160 54

Other Current Assets 0.80 327 221 261 177

A/R 0.65 3,817 2,922 2,481 1,899 149 170 97 110

Short Term Investments 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

Property and Equipment 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

Other Non-Current Assets 0.50 1,524 1,388 762 694 57 61 29 31

Total Assets 32,432 25,250 23,855 18,373 3,185 3,211 2,051 2,005

Total Current Liabilities 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-Term Liabilities 1.00 5,361 2,625 5,361 2,625 728 933 728 933

Sub-Total (508) 852 (393) (725)

Liquidation Value (508) 852 (393) (725)

Common Share Outstanding 453 453 58 57

Net Liquidation Share -1.12 $ 1.88$ (6.74)$ (12.65)$

Amazon Barnes and nobles

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 Sharholderswill get nothing from the

company in case of bankruptcy. They will thus lose their whole

investment

$13.68

Comparative Bankruptcy B/S

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%

CostKrf 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’thave any bonds ?

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 World Investors 6.67

Price (T.Rowe) Associates Inc 4.53

FMR, LLC 3.93

Vanguard Group, Inc. (The) 3.86

State Street Corporation 3.27

Capital Research Global Investors 3.12

Baillie Gifford and Company 2.14

BlackRock Institutional Trust Company, N.A. 2.05

Sands Capital Management, Inc. 1.40

Invesco Ltd. 1.38

Amazon

Holder % Out

Dimensional Fund Advisors LP 7.92

Vanguard Group, Inc. (The) 3.53

BlackRock Fund Advisors 3.53

Towerview LLC. 3.34

Chesapeake Partners Management Co Inc./Md 3.33

State Street Corporation 2.61

Thompson, Siegel & Walmsley, Inc. 2.05

Bank of New York Mellon Corporation 1.98

BlackRock Institutional Trust Company, N.A. 1.75

Kingstown Capital Management L.P. 1.50

Barnes and Noble

9.18% 9.67%

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.

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: $93M2004: 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: $36M2004: 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 $11M2009: 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

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.

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)

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

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 FoxconnInternational)

-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

G Asset Management

Previously in November 2013 :G Asset Management proposed to buy51% of the company at $20 a share

Then in February 21st, 2014 :G Asset Management proposed to buy51% of the company at $22 a share + 51% of BKS e-book division

+5.4%

Pentazon

AMAZING NEWS FOR AMAZON

Increase of income for AWS in the coming years

$

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 Ebaycombined.

-> 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, 2014Alibaba 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 spreeSpent $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).

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

Thank you for your attention

Alibaba is coming….

a jour