Maybe true based on prior investment values, but this latest "competitor" has to be kidding. They have a cost structure much higher than Amazon and are fighting them in a battle they start out about three miles behind in. And they say they can undercut Amazon by this much? Are you kidding me??? It will cost Amazon for maybe a month, but the challenge will fall by the wayside too. Amazon is probably laughing at these guys. Amazon may never have deserved the valuation they did in the past, but for better or worse they are a break-even company about to be solidly profitable. Not billion dollars profitable, but certainly a strong retail presence with no peers in the online field. If someone really thinks they can go out and undercut an already highly-discounted retailer, they must be kidding themselves. Amazon probably will only match them in specially chosen areas and then let them fold up in the rest. When a company that has no marketable database and no loyalty from book buyers thinks they can replicate the kind of distribution and costs savings Amazon can with their vast investments, then that is a crazy-ass CEO. If anything, I think the best idea is to short the daylights out of any companies that come up with such ridiculous ideas. You go out and try to slowly work your way up in a business, not go out and tell the world you are challenging the top dog to a duel at noon in the courtyard. This business has its open niches and its ability to pick up some of Amazon's customers with a smaller model based on specialties or service touches. You never go out and take them on in price, that is foolish. No one is stupid enough to be a small regional store and then say they are going to grow big by undercutting Walmart. No one is that stupid, but these guys seem to be trying.


If I were Amazon, what I would do is say fine. Let them have the price edge on the best-sellers by any margin they want. Then see what they do if everyone goes and buys from them in the first month. See how they can't fill 2% of their orders and piss every customer off that gives them a chance. That ought to end this charade really quick.


Amazon's model really isn't about the net or anything high-tech anymore. Its about distribution, advantages due to scale, and most of all delivering a quality product to customers. They are a very good company in all categories and its folly to think they are on the verge of collapse due to the rules of the business market. Their valuation might be a bit rich when looking at EPS, but from a free cash flow perspective they are on the verge of hitting the bonanza.