Amazon, Borders Extend Books Site Deal
The meat of the
Amazon.com
(AMZN) - Get Report
story will will have to wait till after the close. First, though, the company offered Wall Street some small potatoes.
The Seattle-based online retail giant said Tuesday morning that it is expanding its alliance with bookseller
Borders
(BGP)
. The deal looks like a solid public-relations move -- but one that would likely have little impact on Amazon's financial outlook, which the company is expected to detail later Tuesday.
The expansion includes a "multiyear extension of the original agreement," which was announced last April, and the launch of an in-store pickup option for customers who purchase books on Borders' Web site, which Amazon operates as part of the original deal. At the same time, Amazon announced it will run a Web site for Waldenbooks, an 820-store chain owned by Borders.
The financial terms of the original deal were never announced, but it was
widely considered to have little impact on the bottom line. After all, the Borders site, in the year before it linked up with Amazon, raked in a paltry $27 million in sales. By comparison, in that same year Amazon's core books business brought in $1.7 billion in sales.
Still, as the company prepares to report first-quarter earnings after the close of trading Tuesday, any good news concerning the fast-growing, high-margin partnership business will likely be well received. Problems at two of its higher profile partnerships -- those with
Toys R Us
(TOY)
and
Drugstore.com
(DSCM)
-- have come to light and weighed on the stock.
Earlier this year,
TheStreet.com
reported that Toys R Us, Amazon's largest partner, had sought to renegotiate terms. Secondly, Amazon's deal with Drugstore.com will come to an end in June rather than April 2003 as originally planned, both outfits have disclosed in regulatory filings. In addition, Lehman Brothers analyst Holly Becker recently weighed in with a
report that questioned the lack of visibility in the segment.
That said, Amazon shares have rallied since the company posted its first-ever quarterly profit in January, and the stock has remained mostly level even as the tech and telecom sectors have been ravaged by worries about debt loads and information technology spending. Amazon, which has benefited by having little truck with either of those trends, lately traded up 19 cents at $14.50.
Seattle-based Amazon is expected to
report a first-quarter loss, excluding certain items, of 9 cents a share, compared with a 21-cent loss in the year-ago period, according to Thomson Financial/First Call. Analysts expect revenue to come in at $805 million, up from $700 million a year ago.
Several bits of data released from various research outfits show that e-commerce was strong in the first quarter. For example, comScore estimates that total e-commerce sales rose 50% in the quarter, year over year. This led several analysts to raise their revenue targets for Amazon in recent weeks. However, the company instituted free shipping for orders over $99 during the quarter, and so most people kept their profit targets the same.
