Amazon versus Ebay

Amazon versus Ebay
Analyze each company’s history, product / services, major customers, major suppliers, and leadership and provide a synopsis of each company.
Seattle based Amazon.com was founded in July, 1994, but it was introduced to the world in June, 1995 by its CEO Jeff Bezos. Bezos who was a hedge fund manager in New York left to head west after coming across a finding that the usage of the internet is growing 2300 percent a month. He came up with a plan to get his own retail business online, and headed to Seattle to begin his dream. He started with only 3 employees working out of a garage. Jeff Bezos was able to get Kleiner Perkins Caulfied & Byers to fund Amazon. Some of Amazon.com products include a variety from books, to CDs, videos, and video games. Amazon product line also includes groceries, supplies for pets, greeting cards, and has auctions. A major supplier for Amazon is Ingram, a book distributor, who is still the provider for 60 percent of the books. Amazon is also allied with sites such as Yahoo, Excite, GeoCities, and Netscape. Amazon.com also has links that can be used for household purchases such as groceries and prescriptions. Bezos leadership is demonstrated by observing his comfortableness when he is around the people he addresses on a regular basis from customers, to investors, and the employees. Other leadership qualities of Bezos include his understanding of e-commerce, being focused, having an entrepreneurial team to back him, and branding the name Amazon. He is able to retain customers through good customer service, quality products, and quick deliverance of products purchased. Distribution centers are set to help get customers their orders in the quickest time possible. Bezos pay attention to his overhead expenses not being frugal with how his money is spent, and continues the growth of his company through acquisitions and forming alliances. By March of 1997 Bezos presented 2.5 million shares of stock up for sale. In May of 1997 Amazon.com became public for $9 a share. The fourth quarter net sales for Amazon.com in 1997 were $66.0 million. By the fourth quarter of 1998 it grew to $252.9 million. Amazon.com really started taking off and by the beginning of 1999 the market valuation grew to $6 billion and the stock escalated to $209 a share (Saunders, 1999).
Members of the team of officers includes: Jeff Bezos the President, CEO, and Chairman of the board; Jeffrey M. Blackburn, Senior Vice President of business development; Sebastian Cunningham, Senior Vice President of seller services; Andrew R. Jassy, Senior Vice President of Amazon web services; Steven Kessel, Senior Vice President of worldwide digital media; Marc A. Onetto, Senior Vice President of worldwide operations; Diego Piacentini, Senior Vice President of international consumer business; Shelley L. Reynolds, Vice President of worldwide controller and Principal Accounting officer; Thomas J. Szkutak, Senior Vice President and Chief Financial Officer; H. Brian Valentine, Senior Vice President of ecommerce platform; Jeffrey A. Wilke, Senior Vice President of consumer business; and David A. Zapolsky, Vice President, General Counsel, and Secretary. The directors are: Jeff Bezos, the President, CEO, and Chairman of the Board; Tom A. Alberg, Madrona Venture Group; John Seely Brown, Visiting scholar and advisor to the provost at USC; William B (Bing) Gordon, Kleiner Perkins Caulfield & Byers; Jamie S. Gorelick, Wilmer Cutler Pickering Hale and Dorr LLP; Blake G. Krikorian, id8 Group Productions, Inc.; Alain Monié, Ingram Micro Inc.; Jonathan Rubinstein, Former Chairman and CEO, Palm, Inc.; Thomas O. Ryder, Former Chairman and CEO, Reader’s Digest Association, Inc.; and Patricia Q. Stonesifer, Smithsonian Institution (“Amazon.com, Inc.,” 2011).
Driven by the utopian principles of individual excellence, community-based achievement, and changing the world for the better, Pierre Omidyar launched AuctionWeb, now eBay on September 5, 1995 from a room in his apartment. Many thought Omidyar reason for creating eBay was so his wife, who was his fiancé then, would be able to trade PEZ characters. This was not true, but it was a way that Mary Lou Song, in public relations, was able to get others to start paying attention to the site. The site was a source to sell or bid for products, such as computer parts. Omidyar had visions that eBay would bring about positive change with the upholding of values to the community still in place. He also would like for relationships to be formed based on shared interests. Omidyar put his laser pointer which was broken up as the first auction in which he made $14. At the launch, using the services was free, but hardware costs had to be accounted for, and eBay began to charge commissions on sale. Jeff Skoll, a business man and associate of Omidyar, was enlisted to help take eBay to new horizons. Meg Whitman became CEO of eBay in 1998 and along with Pierre Omidyar, the company went public for the first time September 23 of the same year. eBay became the site to go to buy or sell products from televisions, cd players, office equipment and supplies, cell phones, jewelry, toys, clothes, and more (Prince, 2005). eBay which headquarter is in San Jose, California has operation throughout the United States and internationally. The company during the 2010 financial year had revenues recorded at $9,156.3 million. Besides the sales of services and goods, eBay also uses payment services such as PayPal, and allow for businesses and individuals to market their name. eBay is a site known for being able to produce goods that are hard to find or new goods that just came out. The gross merchandise volume reached $61,819 million for 2010. Revenue is also being generated through the use of advertising and classifieds. eBay has an advertising service that other parties use to buy for advertisement from eBay (“Datamonitor,” 2011).
By 2011, eBay reached $68.6 billion in total goods sold. PayPal can be used for secure purchases on eBay, eBay acquired GSI commerce which is a marketing service, and eBay have partnerships or investments in the following companies: Craigslist, ChannelAdvisor, mFoundry, MercadoLibre, and Taiwan (Ruten). John Donahoe joined eBay in March of 2008, and he is the President and CEO of eBay Inc. Beth Axelrod is the senior vice president of human resources of eBay Inc. Mark Carges is the Chief Technology officer and senior vice president of Global Products, marketplaces. Michael Jacobson is the senior vice president of legal affairs and general counsel and secretary of eBay Inc. David Marcus is PayPal president. Alan Marks is the senior vice president of corporate communications for eBay Inc. Chris Saridakis is president of GSI. Bob Swan is the senior vice president of finance and the CFO of eBay Inc. Devin Wenig is the President of eBay global marketplaces. eBay is presently in 39 markets and has over 90 million users. Some of the businesses acquired from eBay are StubHub, Bill Me Later, and Shopping.com (“About eBay,” 2012).
Based on the stock price for the time line listed: The day of initial public offering, January 1, 2012, January 1, 2011, and January 1, 2010, present a graph that illustrates the stock price of each company. Indicate conclusions that can be drawn based on the trend.

Amazon on January 1, 2010, January 1, 2011, and January 1, 2012

eBay on January 1, 2010. January 1, 2011, and January 1, 2012
(“CNN Money,” 2012).
Above are charts of stock prices for Amazon.com, Inc. and eBay Inc. for months of January and years of 2010, 2011, and 2012. The initial public offering for Amazon.com was done in May, 1997 for a mere $9 a share. Amazon closed at 134.00 on January 1, 2010. On December 31, 2010 Amazon closed at 180.80. By December 30, 2011, Amazon was closing at 173.10. eBay had an initial public offering of $53.50 a share on September 23, 1998 which surpassed the target goal of $18 a share. eBay closed at 23.53 on January 1, 2010. On December 31, 2010 eBay was closing at 27.83. December 30, 2011 eBay closed for 30.33 (“Google Finance,” 2012).
Based on the trend both companies seem to be faring well despite the slight drop for Amazon.com, Inc. overall shares in 2011. For the time in question, over the last three years Amazon increased in stock price by 39.10. If the initial public offering was to be included Amazon.com which began at $9 a share has made considerable improvements closing at 173.10 in January. That is an increase of 164.10 eBay which initial public offering was at 53.50 has fallen off since. There was a steady rise from January 1, 2010 through December 30, 2011 with eBay going from 23.53 to 30.33 which is a 6.8 increase in price. Amazon.com which started off at a smaller share than eBay seem to be doing better with a much bigger increase in price during the same time period of eBay. The difference of the increased stock price for Amazon.com at 39.10 and eBay stock price at 6.8 is 32.3 which speak volumes for itself about the differences of the companies, but eBay seem to have the bigger story to tell with an increase of 70 percent overall during the three years.
Research and summarize 2 major events (mergers, acquisitions, political issues) that occurred from 2010 to the present day and the potential impact on the stock price of each company. Indicate how this influences your investment decision related to the company.
With a $2.4 million bid eBay acquired GSI Commerce in March, 2011, which provides customer service, order fulfillment, marketing, and online sales to large retailers like Toys R Us. Prior to this buy smaller business were the primary focuses. The purchasing of GSI Commerce led to its stock soaring to 50.7 percent, and it closed at $29.20 the day of purchase. The intentions of this move were to get into bigger markets and to help PayPal growth as well. GSI is expected to generate $1.3 billion in revenue by 2013 (Martin, 2011).
In November, 2012 eBay is named in a lawsuit by the Justice Department for being engaged in an anticompetitive agreement. This agreement is supposedly with Intuit and it is to prevent the hiring of the other’s employees. Computer engineers and scientists alike are major contributors to the success of both companies, and the agreement is to prevent them from going to the other company by denying them for hire. The lawsuit is brought on by the Justice Department due to the deprivation of employees being able to seek higher salaries and/or positions in the other company. eBay is denying the charge (“Federal Antitrust Lawsuit,” 2012).
Due to the acquisition of The Book Depository, Amazon is being investigated by the Office of Fair Trading. The merger is being fought by the Booksellers Association due to Amazon being somewhat of a monopoly already. OFT is making claims that The Book Depository and Amazon, in order for a quicker process, submitted themselves. No information is being given by Amazon about the price paid for the acquisition or the reasons for wanting the company (Campbell, 2011).
Began in August, 2012, Amazon.com, Inc. launched Amazon Textbook Rental. This feature allows for books to be rented out for a semester at sometimes 70 percent less than the cost. With tuition costs soaring, this gives the college students an alternative to buying textbooks. Amazon Student is also available which is a program for college students which is free, and it allow students to receive two-day shipping for 6 months free of charge and Amazon Prime for a period of four years and up to 50 percent off (“Textbook Rental,” 2012).
My investment decision is more so influenced by Amazon.com, Inc. acquiring The Book Depository and eBay acquiring GSI. The acquiring of GSI drove up stock by 50.7 for eBay. The realization that eBay is now able and willing to go after bigger retailers adding more appeal to the market would definitely help me in making a decision of rather or not to invest in the company. The Justice Department lawsuit will have effects on those involved directly with running the company and employees of the two companies, but as an investor, it will hold no effect based on the fact the share price will remain unaffected. Launching the Textbook Rental is a brilliant idea especially since a lot of Amazon.com users are there to get textbooks at discounted prices. Renting the books instead is an even more affordable way to go and it makes good business sense since oftentimes the books are not being used or needed after the semester pass. Through renting the books, more money is able to come into the company, and hopefully help with increasing the price. But even bigger than Amazon.com, Inc. book rental is the Office of Fair Trading attempts at stopping Amazon and The Book Depository from merging. This is a huge merger which will make Amazon even harder to compete against. If the merger goes through, stock prices are bound to increase which makes room for an investment decision to more than likely invest. But if the merger is stopped, as an investor, I would have to follow up and see if stock prices are affected. By stopping the merger, the Book Association and the OFT would have cut Amazon attempt of being more of a monopoly than it is already. If they are able to do so, other online book stores are still able to compete.
Provide an overall financial analysis for each company that highlights the key characteristics for investment and how this may impact an investor’s decision

Amazon.com, Inc. Income Statement in millions USD
Amazon revenue continues to increase from one year to the next. The company health is not in question because at the beginning of 2010 the company just ended its previous year with $24,509 million. By the end of 2011 revenue had increased to $48,077 million. An investor should view the whole income statement before making any decisions. While Amazon did end the year higher than previous years at $48,077 million its operating expenses was at $47,215 million. The investor can see that while revenue increases so does operating expenses. It has to be decided if by investing there will be opportunity for profit in the coming years (“Google Finance,” 2012).

eBay Inc. Income Statement in millions USD
EBay experienced some years of modest revenue but seem to be back in the flow at the end of 2011. EBay Inc. brought in revenue of $11,651.65 million the end of 2011. The operating expense was at $9,199.08 million. From the ending of 2009 which had revenue of $8,727.36 eBay generated $2,924.29 million more. An investor can see that eBay is faring better than years past, but eBay is slowly bringing in more revenue. An investor must decide if they are willing to stick with eBay for years to come to see what if any considerable profit will come (“Google Finance,” 2012).
Based on the review of the financial data for each company, indicate the accuracy and reliability of the data for making investment decision.
The data given is accurate based on the income statement for each company. These are the year-end results, and it can be one of the factors used in determining rather or not to invest in a company. This should not be the only consideration however when making an investment decision. The reason is the income statement does not show everything. The balance sheet for example will list the liabilities of the company. EBay has more liabilities at $6,734.20 million. But taking a closer look at the balance sheet eBay also has assets of over $27 million as of December 31, 2011. Amazon has over $15 million in liabilities and $22,834 million total assets as of September 30, 2012. The only thing that can be reliable is all of the facts. And then you still can be taking chances. The stock market can crash. A different retailer can come along to compete. Nothing is etched in stone (‘‘Google Finance,’’ 2012).
Recommend which company I consider as the better investment for your client and how I would present my recommendation with data from my analysis
I consider Amazon.com, Inc. to be the better investment. Based on the analysis revenue almost went up by 50 percent from the end of 2009 through the end of 2011. The increase went from $24,509 million by the end of 2009 to $48,077 million in revenue by the end of 2011. In comparison eBay was at $8,727.36 the end of 2009 in revenue and only increased to $11,651.65 million the end of 2011. EBay has more assets currently holding over $32 million while Amazon total assets are at $22,834 million. Both companies are faring well. But investing involves tons of other decisions to be made. Looking at the potential for profitability, Amazon.com, Inc. seems to be the best choice. Over the last three years Amazon increased in stock price by $39.10.The most recent quotes are out with eBay at 51.74 closing and Amazon with a closing price of 253.27. Again based on the analysis Amazon.com, Inc. would be my recommendation (‘‘Google Finance,’’ 2012).