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Amazon: Financial AnalysisMar 05Jun 05Sep 05Dec 05Mar 06Jun 06Sep 06Dec 06Mar 07Jun 07Sep 07Dec 07Mar 08FY 2005FY 2006FY 2007FY 2008EFY 2009E

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Analysis By:

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Silicon Alley Insider

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DecDecDecDecDec

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INCOME STATEMENTMar 05Jun 05Sep 05Dec 05Mar 06Jun 06Sep 06Dec 06Mar 07Jun 07Sep-07Dec 07Mar 08FY 2005FY 2006FY 2007FY 2008EFY 2009E

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Net sales$1,902$1,753$1,858$2,977$2,279$2,139$2,307$3,986$3,015$2,886$3,262$5,673$4,135$8,490$10,711$14,836$18,931$25,306

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Y/Y Change20%22%24%34%32%35%41%42%37%26%39%28%34%

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Cost of sales$1,444$1,303$1,395$2,310$1,732$1,630$1,758$3,136$2,296$2,185$2,500$4,503$3,179$6,452$8,256$11,484$14,331$19,296

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% of revenue76%74%75%78%76%76%76%79%76%76%77%79%77%76%77%77%76%76%

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Gross profit$458$450$463$667$547$509$549$850$719$701$762$1,170$956$2,038$2,455$3,352$4,600$6,010

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Gross margin24.08%25.67%24.92%22.41%24.00%23.80%23.80%21.32%23.85%24.29%23.36%20.62%23.12%24.00%22.92%22.59%24.30%23.75%

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Operating expenses

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Fulfillment$166$158$171$249$193$189$217$337$260$258$296$478$354$744$936$1,292$1,657$2,214

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% of revenue8.73%9.01%9.20%8.36%8.47%8.84%9.41%8.45%8.62%8.94%9.07%8.43%8.56%8.76%8.74%8.71%8.75%8.75%

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Marketing$45$42$44$68$54$53$64$92$72$65$74$133$103$199$263$344$416$595

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% of revenue2.37%2.40%2.37%2.28%2.37%2.48%2.77%2.31%2.39%2.25%2.27%2.34%2.49%2.34%2.46%2.32%2.20%2.35%

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Technology and content$92$106$121$132$146$167$172$177$186$201$209$221$234$451$662$817$1,136$1,670

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% of revenue4.84%6.05%6.51%4.43%6.41%7.81%7.46%4.44%6.17%6.96%6.41%3.90%5.66%5.31%6.18%5.51%6.00%6.60%

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General and administrative$46$38$32$49$45$50$54$45$56$58$57$64$61$165$194$235$284$473

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% of revenue2.42%2.17%1.72%1.65%1.97%2.34%2.34%1.13%1.86%2.01%1.75%1.13%1.48%1.94%1.81%1.58%1.50%1.87%

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Other operating expense (income)$1$2$40$4$3$3$2$2$0$3$3$3$6$47$10$9$17$23

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% of revenue0.05%0.11%2.15%0.13%0.13%0.14%0.09%0.05%0.10%0.09%0.05%0.15%0.55%0.09%0.06%0.09%0.09%

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Total operating expenses$350$346$408$502$441$462$509$653$574$585$639$899$758$1,606$2,065$2,697$3,510$4,975

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% of revenue18.40%19.74%21.96%16.86%19.35%21.60%22.06%16.38%19.04%20.27%19.59%15.85%18.33%18.92%19.28%18.18%18.54%19.66%

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Income (loss) from operations$108$104$55$165$106$47$40$197$145$116$123$271$198$432$390$655$1,090$1,035

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% of revenue5.68%5.93%2.96%5.54%4.65%2.20%1.73%4.94%4.81%4.02%3.77%4.78%4.79%5.09%3.64%4.41%5.76%4.09%

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Interest income$9$9$12$14$15$13$14$18$20$20$23$28$26$44$60$91$0$0

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Interest expense-$26-$22-$22-$22-$21-$19-$21-$19-$19-$19-$19-$21-$22-$92-$80-$78$0$0

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Other income (expense), net$3-$1$0$0-$1$1$4-$8$0-$1-$1$1$3$2-$4-$1$0$0

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Remeasurement and other$14$18$6$4-$3$12$1$1-$2-$5-$2$2$2$42$11-$7$0$0

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Total non-operating income (expense)$0$4-$4-$4-$10$7-$2-$8-$1-$5$1$10$9-$4-$13$5$0$0

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% of revenue0.23%-0.22%-0.13%-0.44%0.33%-0.09%-0.20%-0.03%-0.17%0.03%0.18%0.22%-0.05%-0.12%0.03%0.00%0.00%

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Income (loss) before income taxes$108$108$51$161$96$54$38$189$144$111$124$281$207$428$377$660$1,090$1,035

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% of revenue5.68%6.16%2.74%5.41%4.21%2.52%1.65%4.74%4.78%3.85%3.80%4.95%5.01%5.04%3.52%4.45%5.76%4.09%

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Provision (benefit) for income taxes$56$56$21-$38$45$32$19$91$33$33$44$74$62$95$187$184$382$353

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% taxable income51.85%51.85%41.18%-23.60%46.88%59.26%50.00%48.15%22.92%29.73%35.48%26.33%27.00%22.20%49.60%27.88%35.00%34.08%

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Income before cumulative effect change in accounting principle$52$52$30$199$51$22$19$98$111$78$80$207$145$333$190$476$709$682

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Cumulative effect of change in accounting principle$26$0$0$0$0$0$0$0$0$0$0$0$0.23$0$0$0$0$0

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Net income (loss) $78$52$30$199$51$22$19$98$111$78$80$207$145$333$190$476$709$682

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% of revenue4.10%2.97%1.61%6.68%2.24%1.03%0.82%2.46%3.68%2.70%2.45%3.65%3.51%3.92%1.77%3.21%3.74%2.70%

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Diluted earnings (loss) per share:

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 Prior to cumulative effect of change in accounting principle$0.12$0.12$0.07$0.47$0.12$0.05$0.04$0.23$0.26$0.18$0.19$0.48$0.34$0.78$0.45$1.11$1.66$1.59

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 Cumulative effect of change in accounting principle$0.06$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00

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$0.18$0.12$0.07$0.47$0.12$0.05$0.04$0.23$0.26$0.18$0.19$0.48$0.34$0.78$0.45$1.11$1.66$1.59

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Shares out423425428426426426424422420423425427426426422427427429

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Dilution y/y0.71%0.24%-0.93%-0.94%-1.41%-0.70%0.24%1.18%1.80%-0.94%1.18%0.00%0.47%

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Segment Information & Revenue Model

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NORTH AMERICA

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Media$699$632$684$1,030$815$730$785$1,251$990$923$1,081$1,637$1,205$3,045$3,581$4,631$5,604$7,004

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y/y change16.60%15.51%14.77%21.46%21.47%26.44%37.71%30.86%21.72%17.60%29.32%21.00%25.00%

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% of total68.06%65.83%65.71%61.20%65.36%63.09%62.45%56.66%61.04%57.65%60.46%53.08%56.68%64.64%61.02%57.21%53.58%50.95%

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Electronics & Other General Merchandise$282$278$304$580$374$365$409$876$564$606$631$1,336$826$1,444$2,024$3,137$4,486$6,280

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y/y change32.62%31.29%34.54%51.03%50.80%66.03%54.28%52.51%46.45%40.17%54.99%43.00%40.00%

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% of total27.46%28.96%29.20%34.46%29.99%31.55%32.54%39.67%34.77%37.85%35.29%43.32%38.85%30.65%34.49%38.75%42.89%45.69%

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Other$46$50$53$73$58$62$63$81$68$72$76$111$95$222$264$327$370$462

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y/y change26.09%24.00%18.87%10.96%17.24%16.13%20.63%37.04%39.71%18.92%23.86%13.00%25.00%

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% of total4.48%5.21%5.09%4.34%4.65%5.36%5.01%3.67%4.19%4.50%4.25%3.60%4.47%4.71%4.50%4.04%3.53%3.36%

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TOTAL$1,027$960$1,041$1,683$1,247$1,157$1,257$2,208$1,622$1,601$1,788$3,084$2,126$4,711$5,869$8,095$10,459$13,747

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y/y change21.42%20.52%20.75%31.19%30.07%38.38%42.24%39.67%31.07%24.58%37.93%29.20%31.43%

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% of consolidated revenue54.00%54.76%56.03%56.53%54.77%54.09%54.49%55.39%53.80%55.47%54.81%54.36%51.41%55.49%54.80%54.56%55.25%54.32%

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INTERNATIONAL

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Media$675$614$629$968$763$718$757$1,247$1,000$910$1,010$1,692$1,338$2,886$3,485$4,612$5,442$6,531

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y/y change13.04%16.94%20.35%28.82%31.06%26.74%33.42%35.69%33.80%20.76%32.34%18.00%20.00%

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% of total77.14%77.43%76.99%74.81%74.08%73.12%72.10%70.13%71.79%70.82%68.52%65.35%66.60%76.37%72.00%68.42%64.23%56.49%

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Electronics & Other General Merchandise$199$178$187$321$263$259$290$523$383$364$448$877$655$885$1,335$2,072$2,859$4,003

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y/y change32.16%45.51%55.08%62.93%45.63%40.54%54.48%67.69%71.02%50.85%55.21%38.00%40.00%

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% of total22.74%22.45%22.89%24.81%25.53%26.37%27.62%29.42%27.49%28.33%30.39%33.87%32.60%23.42%27.58%30.74%33.75%34.63%

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Other$1$1$1$5$4$5$3$8$10$11$16$20$16$8$20$57$171$1,026

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y/y change300.00%400.00%200.00%60.00%150.00%120.00%433.33%150.00%60.00%150.00%185.00%200.00%500.00%

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% of total0.11%0.13%0.12%0.39%0.39%0.51%0.29%0.45%0.72%0.86%1.09%0.77%0.80%0.21%0.41%0.85%2.02%8.88%

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TOTAL$875$793$817$1,294$1,030$982$1,050$1,778$1,393$1,285$1,474$2,589$2,009$3,779$4,840$6,741$8,473$11,560

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y/y change17.71%23.83%28.52%37.40%35.24%30.86%40.38%45.61%44.22%194.09%228.36%160.37%321.73%205.89%

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% of consolidated revenue46.00%45.24%43.97%43.47%45.23%45.91%45.51%44.61%46.20%44.53%45.19%45.64%48.59%44.51%45.20%45.44%44.75%45.68%

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CONSOLIDATED REVENUE$1,902$1,753$1,858$2,977$2,277$2,139$2,307$3,986$3,015$2,886$3,262$5,673$4,135$8,490$10,709$14,836$18,931$25,306

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y/y change19.72%22.02%24.17%33.89%32.41%34.92%41.40%42.32%37.15%26.14%38.54%27.60%33.67%

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CASH FLOW

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Cash from Operations-$294$244$153$630-$303$130$130$744-$279$299$237$1,149$645

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Y/Y Change

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% of Revenue

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Capital Expenditures$26$46$76$55$46$58$62$50$34$47$69$73$61

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Y/Y Change26%-18%-9%-26%-19%11%46%79%

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% of Revenue1%3%4%2%2%3%3%1%1%2%2%1%1%

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Free Cash Flow-$320$198$77$575-$349$72$68$694-$313$252$168$1,076$584

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Y/Y Change

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% of Revenue

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BALANCE SHEET

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Cash, Equivalents + Marketable Secs.$1,151$1,325$1,419$2,000$1,334$1,419$1,219$2,019$1,420$1,665$1,909$3,112$2,151

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Inventories$403$383$456$566$538$521$736$877$754$735$970$1,200$1,077

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Total Debt$1,535$1,493$1,489$1,480$1,191$1,237$1,234$1,247$1,251$1,256$1,273$1,282$467

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VALUATION

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Price$22.58

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Shares Outstanding (Diluted)425

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MARKET CAPITALIZATION$9,597

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Market Capitalization

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+ Debt$1,273

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- Cash$1,909

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ENTERPRISE VALUE$8,961

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VALUATION RATIOS

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P/E:EPSP/E

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CY 2007E$1.1120x

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CY 2008E$1.6614x

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CY 2009E$1.5914x

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