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Amazon Makes a Profit
sofar writes: "Amazon finally makes a profit. Well, only $ 5mln, but maybe you can actually earn something on your stock now. At 1c a share it's no pension fund in Florida yet." I wonder how much of that profit represents 1-click licensing fees.
I can't believe people. Amazon posts a profit for the first time (and on a reasonable time schedule in the real world) and then someone complains that it's not a big enough profit. What did the submitter expect? a 1-billion dollar windfall? considering the state of the US economy at the moment the fact that amazon made a profit is even better.
My blog: http://jkratz.dyndns.org/~jason/blog/
What's with all the hell freezing over cracks? Is it really so difficult to believe a retailer would eventually turn a profit?
Or all we all just amazed that at least one DotCom company had a solid business plan, stuck with it, and now has something to show for it?
[DISCLAIMER: I own Amazon stock, and I still believe that a company that provides good customer services can't be bad, so I'm holding onto it]
Agreed.
As much as I hate about their one-click patent, Amazon is best place for books and other stuffs. Their recommendation feature is excellent. I found out a lot of authors that I would have known otherwise. And the service is first class. If only other companies would care so much about service quality too....
Sure, Amazon has been losing tons of money, but you have to give credit to the company for very good forcast of their target. They have been very good at being on the mark in the past.
Now, if Jeff Bezos commits to more consistent customer privacy policy, I would be a really happy customer (and shareholder too).
Erm, I'm sorry to bring you down from the clouds but most internet startup failures were not due to them being ahead of their time.
Unless of course in the future a sucessful business is one that make a huge loss with no real path to profitability.
Yes Amazon is starting to go from loss, to break even and finally profit but I would hardly call them ahead of their time since at the end of the day they sell mainly Books, CD's, Video's and DVD's.
Greedy vulture capitalists distracted the contruction of internet commerce in the late 1990s. Finally a few companies are getting it to work properly.
An Item that the article didn't mention was their used items. This is a very smart move by Amazon(and a direct rip-off of half.com) since all they do is list used items that people want to get rid of, Amazon gets a percentage of whatever a person sells and it costs Amazon $0.0X money.
Wall Street seems to be full of them: people buying stocks based on the "bigger sucker" theory, hoping that whether the stocks were worth anything or not there will be a bigger sucker to sell them to later. The whole dot-com crash was due to the failure of this theory: eventually you reach the biggest sucker.
However, there are still a few people out there who actually look at company earnings and (wait for it...) dividends before buying a stock. If you've got a few spare bucks you want to gamble with, being one of these "investors" may not sound like fun, but people playing with their retirement funds might want to give it a try.
If you read this article from the Seattle Times, it talks of Amazon.com's method of 'pro forma' accounting, which seems to be a pretty convenient way to hide expenses from the bottom line.
I'm happy for the supposed turn for the better Amazon.com is experiencing, as much as I am for any bellweather Dot.Com. I'm just not sure I'd want to invest in them personally.
When you calculate the value, technically speaking the enterprise value, of a company you take the value of the equity and add the amount of debt. Therefore, the value of Amazon would be the sum of its present market capitalization, US$4.6B, and its long term debt, roughtly $2B, providing an enterprise value of $6.4B.
Just because Amazon has a substantial amount of debt does not really mean all that much. Assuming that they remain profitable and cash flow positive, Amazon could well continue as the preemminent electronic commerce company for a very long time. The current market conditions have created substantial barriers to entry for new competition.
I am not saying that Amazon is a sure thing as a company, they have some rather creative accounting among other things that could spoil the party. As a growth stock it should have more risk than more slowly growing companies like Nordstrom or Federated Department Stores. At the same time, the company has consistantly achieved success against great odds and remained out of chapter 11, even as more established enterprises like K-Mart, Montgomery Ward or even Enron have hit hard times.
If you want to avoid all risk, you should probably stick with treasury bills.
"...What is good for General Motors is good for America." -Charles Wilson, Secretary of Defense and fmr President of GM
Frankly, Gates could pluck a few billion from his pocket change, buy Amazon, and have a MAJOR strangehold over much of the commercial world. Not only that, but he gets tons of customer data for Passport.
While Microsoft doesn't appear to want to get into the retail market what-so-ever, Amazon would make a great outlet for their gear.
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Amazon's P/S (1.23) is certainly higher than the brick & mortar book stores (Barnes & Noble 0.47, Borders 0.56), but that seems reasonable considering their massively lower overhead costs and need for inventory. You're also paying for the growth - they've come from nowhere to now have sales of the same magnitude as these two, and increased revenues by about 15% last year...
You're still taking a gamble that revenue growth will continue, but that seems a reasonable gamble - not an outrageous overvaluation.
All IMO, IANAL, etc.
Well, yeah - I basically agree with you.
I've been into computers long before the Internet became popular, and I've invested far too much time and effort in this field to just give up on it because of a digital version of the California gold rush.
As long as those of us truly interested in and dedicated to I.T. stick out these "knee-jerk reaction" times, I think things will get back on track sooner, rather than later.
It's the big investors who got burned on the dot-com fiasco, so of course they're the ones out there now proclaiming that "The new economy didn't exist!" and "The next 10 years of the stock market will be driven by industry, brick-and-mortar stores, and traditional service providers." In their minds, it's the only outcome they're comfortable seeing.
The fact is, the Internet is growing up. We're quickly moving from the "wild, wild west" of Cyberspace to a more governed and commercialized space, where the "real world" reaches out and hangs a virtual hat. This also means that after the fallout from the craziness ends, we probably won't see fast growth like we used to see. Instead, we'll see small profits here and there, and a lot of failed commercial sites - paralleling the real business world.
Although I used to criticize Amazon.com for "dabbling" too much (seemed like Bezos wanted to sell everything under the sun, until of course, a particular item didn't pan out so well for him), I think his persistence at selling his core line of products (books and media) is starting to pan out.
I don't wonder at all. For one thing, eBay is the equivalent of a virtual world-wide garage sale/discount goods expo. It's exactly the type of shopping people want to do most when the economy is depressed.
(If you're making lots of cash, you don't want to settle for someone's used stuff. When money is tight or future money is unsure, those cheaper used items start to look like real good options.)
As for other sites like Amazon not benefiting like eBay is - that's really a no-brainer too.
eBay got into the game "early and often". They attained a critical mass of regular buyers and sellers. For a while, I used both eBay and Amazon auctions - but I gave up on Amazon auctions as they just weren't worth my listing fees anymore. (For every 1 item I'd successfully sell there, I'd sell 3 or 4 on eBay - and usually for higher bids.) You have to go where the "eyeballs" are when you want to sell. That starts a chain reaction, since the buyers want to go where the most items are to bid on.
Amazon never really pushed hard enough to win back the users migrating to eBay auctions. I think they had (maybe still have?) a chance to do it because they're another well-recognized Internet name. They'd need to take a loss for a while though, like offer all listings free for 9 months or so, and advertise it in magazines, etc.
Then, they'd also have to ensure they offered every single feature eBay does (dutch auctions, non-paying bidder alerts, easy online payment system, etc. etc.) if they want to keep those people.
Agreed this is good news and needs to be communicated as such. A business with a sound business case and strategy will prosper. This is true irrespective of been a dot-com or not.
Hopefully we will now see the VC's been prepared to fund new start-up's which:
a: Have a real/realistic business case for generating revenue and growth.
b: That have realistic timescales to achive these targets.
Slowly, just slowly I believe that we are emerging from the dot-com mania fall out and returning to a more ratonal age for the perception of web based business based on business fundamentals.
I know Amazon is trying to turn into a retailer-perhaps Walmart.NET or something, but let's focus on its core business-books. It does a good job there. It's changed buying habits all over the world. I mean, how many times have you guys gone online to see how well a book is reviewed? Granted, the system isn't perfect, but it's a hell of a lot better than reading the inside jacket (like I used to do before the NET).
I don't know if Amazon is going to change the world as a retailer, but it has changed the way everyone buys books. Even if you don't buy directly from Amazon, people will often look at the online reviews and than going check out the book in more detail at B&N or Borders.
I believe software is somewhat the same-though I generally don't buy a lot of MS stuff, when I do I check the reviews at Amazon. These are the sort of things where Amazon has developed a really good business model.
If it every does go bankrupt, I expect that they'll just shed all the extra stuff and pair back to light and information oriented items like books and software, they can always make money and they already have volume.
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