Could AOL Time Warner buy Amazon.com?
  07/25/2001 6:59:50 AM MDT Albuquerque, Nm
  By Dustin D. Brand; Owner AMO

On the same day of Amazon's reported loss, AOL Time Warner invests $100 Million in Amazon.   Though initially the terms of the AOL Time Warner agreement in which AOL/TW invests $100 Million in Amazon sounded like AOL/TW could not purchase Amazon, the SEC filings are now clear.

America Online Time Warner is allowed to make a friendly bid to acquire the Seattle, Wash.-based online retailer if it so desires, according to documents filed with the U.S. Securities and Exchange Commission. This means, AOL/TW could purchase Amazon.com outright pending approval from Amazon.

Where the agreement confused analysts is that it prevents AOL/TW from making a bid to acquire management control or ownershop of Amazon.com, but it contains a clause that would permit a friendly bid to move forward. The clause prohibits AOL from going ahead with an acquisition or making a public announcement of its acquisition plans without the approval of Amazon.com's board of directors.

So, wha-la, AOL/TW can make a friendly bid to purchase Amazon.com under their current $100 Million investment in Amazon. Amazon has long been a "poster child" of internet e-commerce with the 1 exception that Amazon hasn't posted a single profit. In fact, Amazon continues to post losses, and continues to avoid a cash-flow positive profit for shareholders. This means quite simply that although Amazon is bring in profits in the form of sales, etc, their operating expenses prevent them from actually profiting - making any "real money".

Because of the reason that Amazon.com is having trouble making any real money, and since Amazon is a great brand with worldwide exposure, this makes them a natural target for AOL/TW who obviously after spening $100 Million thinks Amazon is worth it.

In return for the AOL/TW investment, Amazon.com will promote AOL as its exclusive ISP (Internet service provider) marketing partner and will make AOL software available for download from the Amazon.com Web site, the statement said. The online retailer will also offer AOL service subscriptions alongside products and services from AOL's parent company, AOL Time Warner, on its Web site, the statement added.

The agreement will be expanded internationally, the two companies said. Within months, or maybe a year AOL/TW could just purchase Amazon.com. AOL spent $4.2 Billion on Netscape, and one could argue that was a bit too much (immediately the stock price doubled yeilding AOL a 100% gain on their purchase), how much of their investment is left? Internet Explorer now accounts for over 90% of the worldwide Web Browser market - not Netscape.

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