Amazon.com takes 1.7% stake in Sotheby's

IN A startling fusion of the computer mouse and the gavel, Amazon.com, the pioneer cyberspace retailer of books and music, revealed yesterday that it is spending $45m (pounds 28.3m) on a 1.7 per cent stake in Sotheby's, the venerable auction house.

The deal reflects the transformation of the auction business. It has become increasingly apparent that selling art through cyberspace is here for good.

The change has been driven in particular by the wild success of the online auction company, eBay. Notwithstanding a nasty blip last Friday when its website crashed, eBay has risen meteorically. It has democratised the auction business, allowing anyone to sell and buy anything from an antique bicycle to a South Pacific tribal headdress.

In recent months Sotheby's, its arch-rival Christie's and Amazon itself have all set up auction websites. By linking up with Sotheby's and taking on some of its gloss, Amazon clearly hopes to close the gap on eBay. "Who better to help than Sotheby's?" Jeff Bezos, the founder and chief executive of Amazon, asked.

Under a 10-year agreement signed yesterday, Amazon and Sotheby's will set up a joint auction site of their own to be called sothebys.amazon.com, which should be up and running before the end of the year. Both firms say their existing auction websites will remain in operation.

The new site will be distinct in one important way. Goods for sale - from art, antiques, Hollywood memorabilia and coins - will be offered exclusively by Sotheby's itself and a group of selected dealers. They will also be guaranteed by Sotheby's.

Shares in both companies rose strongly yesterday. Amazon agreed to buy 1 million shares of Sotheby's Holdings class A common stock at $35.44 per share and also to buy, for $10m, three-year warrants to buy an extra 1 million shares at $100 per share.