Amazon.com Buys 46% of Drugstore.com

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Web bookseller and Internet commerce bellwether Amazon.com Inc. broadened its product base by buying 46 percent of drugstore.com, a start-up online drugstore whose e-commerce site went live Feb. 25.


Drugstore.com, Redmond, WA, sells more than 15,000 brand-name healthcare products through www.drugstore.com and features an online pharmacy as well. Peter Neupert, president/CEO of the Redmond, WA, company, formerly held a senior executive post at neighboring software giant Microsoft Corp. Amazon did not disclose terms of the deal. The Seattle company has had abundant capital on hand since raising $1.25 billion in a junk bond offering in late January.


Following the announcement, securities firm BancBoston Robertson Stephens raised its recommendation on Amazon stock to a strong buy rating from a buy rating.


"The investment in Drugstore.com represents Amazon's first move into an exciting new product category and demonstrates its ability to secure new tenants," said Keith Benjamin, Robertson Stephens' managing director and senior Internet analyst.


Drugstore.com employs licensed pharmacists who can give consumers advice over the phone, and the company will send intermittent e-mails reminding customers to restock on their regularly used drugs. Drugstore.com struck a deal to be the dominant online drugstore sponsor on Excite Inc.'s www.excite.com portal and the company arranged banner ads on Yahoo! Inc.'s health-related site. Drugstore said it will be a "key pharmacy partner" in America Online Inc.'s health area.
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