Business Model

Jan 19, 2007 10:01:05

The company began as an online bookstore. While the largest brick-and-mortar bookstores and mail-order catalogs for books might offer 200,000 titles, an online bookstore could offer many times more. Bezos renamed his company "Amazon" after the world's most voluminous river. The company was incorporated in 1994 in the state of Washington, began service in July 1995, and was reincorporated in 1996 in Delaware. Amazon.com had its initial public offering on May 15, 1997, trading on the NASDAQ stock exchange under the symbol AMZN at an IPO price of $18.00 per share (equivalent to $1.50 after three stock splits during the late 1990s). Amazon's initial business plan was unusual: the company did not expect to turn a profit for four to five years. In retrospect, the strategy was effective. Amazon grew at a steady pace in the late 1990s while many other Internet companies grew at a blindingly fast pace. Amazon's "slow" growth caused a number of its stockholders to complain, saying that the company was not reaching profitability fast enough. When the Dot-com bubble burst and many e-companies went out of business, Amazon persevered and finally turned its first profit in the fourth quarter of 2002: a meager $5 million, just 1 cent per share, on revenues of over $1 billion, but it was important symbolically. The firm has since remained profitable: net profits were $35 million in 2003, $588 million in 2004 and $359 million in 2005. Revenue kept growing thanks to product diversification and international presence: $3.9 billion in 2002, $5.3 billion in 2003, $6.9 billion in 2004 and $8.5 billion in 2005. On November 21, 2005, Amazon entered the S&P 500 index, replacing the venerable AT&T after it merged with SBC Communications. Time Magazine named Bezos its 1999 Man of the Year in recognition of the company's success in popularizing online shopping. source: Wikipedia