The Egghead brand will live on.
, in a bid to broaden its fast-growing but thus far unprofitable electronics business, has bought the assets of defunct e-tailer Egghead.com and will relaunch Egghead's site under that storied name.
Web surfers who type in the URL
www.egghead.com are redirected to Amazon's electronics store, where a message says, "Shop today and check back for the exciting relaunch of Egghead.com, coming soon." According to published reports, Amazon paid $6.1 million for the Egghead assets, including the name and some intellectual property.
Egghead filed for bankruptcy in August, ending a long run as a public company in which its retail operations ultimately failed and an attempt at a Web-only software business also proved untenable. All the same, the company boasted a solid brand that could boast traffic to Amazon's electronics site, which has struggled to find a way to profitability. Revenue from the segment rose about 25% in the first nine months of 2002, but the unit still loses money. The company's core U.S. books business, by contrast, remains profitable but is now seeing sales
decline, 12% from a year ago in the latest quarter.
"We believe that the Egghead brand had a loyal following among small businesses, small-home offices and technology savvy buyers representing 4 million customers that could potentially frequent the site over the upcoming year," wrote Jeetil Patel, an analyst at Deutsche Banc Alex. Brown, in a report published Wednesday. (Patel has a buy rating on Amazon, and his firm hasn't done recent underwriting for the company.)
In a lesser deal, Amazon also recently bought the assets of OurHouse.com, a defunct online hardware seller, for less than $1 million, Patel notes.
Good Old Days
Egghead, which began business in 1984 with retail shops, was once a popular brand name in the software arena. Its stock traded on the
under the ticker symbol EGGS. It shuttered its retail stores in 1998 to focus on selling goods online, and its stock promptly soared. But in typical dot-com fashion, its shares eventually sank as it bled cash, until it was forced to declare bankruptcy in August in a San Francisco court.
According to published reports, Fry's Electronics had agreed to buy Egghead's assets for $10 million, but that deal fell through in October.
Amazon shares were recently up 65 cents at $12.58, a rise that is likely attributable to two bullish reports published Wednesday about Amazon's profit outlook. In one report, Lehman Brothers predicted that, for the first time, the company would report positive free and operating cash flows in 2002.
In another, US Bancorp Piper Jaffray analyst Safa Rashtchy narrowed his fourth-quarter loss estimate to 4 cents from 5, while saying operating results are likely to be in the black to the tune of $13 million. (Rashtchy has a buy rating, and his firm does not have an investment banking relationship with Amazon.)
Yet other indicators suggest the fourth-quarter outlook for Amazon is far from clear. According to another
analysis recently reported by
, there are signs the company could fall short of revenue estimates, putting its much-hyped goal of breaking even for the first time, on a limited basis, in jeopardy.
Although the company releases a plethora of data in its quarterly reports, unlike bricks-and-mortar retailers it doesn't report monthly sales data. Thus gleaning sales trends for Amazon is more akin to reading a crystal ball.
But to make a profit, maybe you have to break a few eggs.