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For what seemed like forever, rumors swirled of an Amazon.com (NASDAQ:AMZN)/Coinstar (CSTR) partnership. And, for some time, I wondered why nothing ever materialized. If I may take a stab at one possible reason why - Amazon CEO Jeff Bezos would rather sling fish at Pike's Place Market than get into bed with a company with a management team that has a worse handle on its business than an unnamed tech firm out of Waterloo, Ontario, Canada.

Here's a look at Coinstar's recent earnings guidance history, courtesy of Briefing.com:

Click to enlarge


The latest misstep came after the bell Thursday, when Coinstar guided down revenues, guided up EPS and announced the departure of a key executive. In after hours trading, investors reversed CSTR's recent uptrend, knocking the shares down by nearly 12%. CSTR's chart is almost unpredictable as management's financial forecasting:

Click to enlarge


(Chart courtesy of FreeStockCharts.com)

Just when Netflix (NASDAQ:NFLX) decides to hand Coinstar a gift, the company sends itself off of yet another cliff. Coinstar's unintended refusal to be a real competitor opens the door in the battle against Netflix even wider now not only for Amazon, but for DISH Network (NASDAQ:DISH) and whoever ends up with Hulu. While Google (NASDAQ:GOOG), Yahoo (NASDAQ:YHOO) and Microsoft (NASDAQ:MSFT) have received the most play as Hulu bidders, I have to wonder if Amazon's name should come up more often.

Apparently, Amazon made itself part of the competition, but wants some type of guarantee to, most likely, exclusive content. Of course, any type of exclusivity represents a Netflix killer.

What's more interesting about a potential Amazon-Hulu hookup, however, is how the deal would add to Amazon's already amazing, yet still evolving synergy. A tablet from Amazon lays in waiting. And Hulu by Amazon, or whatever Bezos would call it, integrates perfectly with it.

In terms of synergy, a Hulu acquisition takes Google's YouTube to the next level; it could enhance the Facebook (Zuckerberg could be in the bidding) experience (which, as is, has to hit a wall sooner or later). And it could even, though more of a stretch, blend in nicely with future iterations of Microsoft Windows and Skype.

But, Hulu on an Amazon tablet could be the end all and be all. As it stands, Amazon's streaming content, even with the recent CBS (NYSE:CBS) deal, is worse than Netflix's. And that's saying a lot because Netflix's offering is pretty weak. Taking what Hulu has, with some level of exclusivity, will only help Amazon do what it wants to do with its tablet after all - not enter a losing battle with Apple (NASDAQ:AAPL) - but drive more business to its multi-billion dollar e-commerce core.

A couple of weeks ago, I suggested the August $215/$230 bull call spread on AMZN. At the time, that trade cost about $5.70 to get into. As of Thursday's close, the spread would run you roughly $5.27.

While I am still comfortable with that play, I would rather go for a credit ahead of Amazon's July 26th report by selling the August $190 put and pocketing about $2.00. If AMZN somehow manages to pull back that far post-earnings, I would be happy to get put shares and be "forced" to buy them at $190 apiece. Concurrently, I would look to use that $2.00 credit as a modest down payment on the AMZN January 2013 LEAPS call options of your choice.

With or without Hulu, Amazon has an amazingly bright future ahead of it. While Hulu would be great, Amazon does not need Hulu. It needs Coinstar like Bezos needs a hole in his head. Amazon has a cash cow - e-commerce - that nobody will take away; everything else it does - and there's plenty - exists to fatten that big fish's bottom line.

Disclosure: I am short NFLX.

Additional disclosure: I may initiate a long position in AMZN over the next 72 hours.

Source: With Competition Like This, Does Amazon.com Need Partners?