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April 27, 2006

New playmates?

Posted by Monica Soto at 12:17 PM

Will Amazon.com and Toysrus.com ever play together again?

We wrote about Amazon's efforts to reinstate the long-time, embattled partnership.

But PiperJaffray analyst Aaron Kessler wrote in a research note today that it appears Toys 'R Us might have chosen GSIC to power its Web site, once its partnership with Amazon ends June 30.

Toys R Us Deal Appears Likely. While GSIC did not comment on whether it has won the Toys R Us Deal from Amazon, we believe it is highly likely that is has. GSIC noted they will build a new call center this year and has plans for a new warehouse in 2007, which we believe will be used to support a customer the size of Toys R Us. In terms of financial impact, we believe Toys R Us was generating at least $50M in fees for Amazon a year. While we do not expect the Toys R us deal to be this lucrative for GSIC, we believe it would be very material to both revenues and earnings. We would not be surprised to see Toys R Us add $10-$15M to our 2007 EBITDA estimate.

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