Tuesday, March 6, 2001
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Posted on: Tuesday, March 6, 2001

Amazon stocks soars on news of Wal-Mart alliance


Associated Press

NEW YORK — Shares of Amazon.com soared more than 26 percent yesterday after a published report said the online retailer was forming a strategic alliance with Wal-Mart Stores Inc.

Britain’s Sunday Times said that under the deal, expected to be announced in six weeks, Amazon would handle Wal-Mart’s online strategy, similar to a deal Amazon struck with Toysrus.com in August. In return, Amazon would gain presence in Wal-Mart’s stores. The deal would involve revenue-sharing on both sides.

Neither Wal-Mart CEO Jeanne P. Jackson nor Amazon.com CEO Jeff Bezos would comment.

Henry Blodget, an analyst at Merrill Lynch, said in a research report yesterday that the alliance, if struck, would "act as an effective marketing vehicle." "Wal-Mart shoppers who might not otherwise use or think about Amazon would now encounter it every time they went shopping," he wrote.

"From Wal-Mart’s perspective, the deal would allow Wal-Mart to continue to focus on what it knows and does exceptionally well — store-based retailing, while outsourcing its e-commerce strategy to Amazon," he said.

But another analyst dismissed the reported partnership.

"I think Wal-Mart is very satisfied with their efforts (on the Web). I don’t see them going in and rescuing Amazon.com," said Bob Buchanan, analyst at A. G. Edwards & Sons.

Wal-Mart has not been able to transfer its success to the online world. The company has redesigned its site twice in the past year, and just last week cut 10 percent of its 250-person work force to conserve cash. Amazon, for its part, has had difficulty expanding its business efficiently, but it "it is the hands-down winner at customer acquisition and service in the world of online commerce," said Jeffrey Fieler, analyst at Bear Stearns.

Meanwhile, Amazon has struggled to turn its first profit.

Amazon stock was up $2.63 to close at $12.63 yesterday on the Nasdaq market. Wal-Mart shares fell 55 cents to close at $48.37 on the New York Stock Exchange.

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