Amazon's Ambitious Bets Pile Up, and Its Losses Swell

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Amazon's Ambitious Bets Pile Up, and Its Losses Swell

Posted by Soulskill on Friday July 25, 2014 @01:31AM from the i-will-gladly-pay-you-tuesday-for-a-hamburger-with-2-day-shipping dept.

New submitter shirleymarone sends word that investors are becoming impatient with Amazon's willingness to absorb short-term losses for theoretical long-term gains. The company brought in over $19 billion in revenue last quarter, but reported a net loss of $126 million. The company warned of even greater losses this quarter. Amazon officials exude a serene if vague confidence. "We're not trying to optimize for short-term profits," Thomas J. Szkutak, the chief financial officer, said in a conference call. "We're investing on behalf of customers and share owners," he said. "We're fortunate to have these opportunities." But even the analysts, who are generally enthusiastic about the company and its global ambitions, are asking slightly more pointed questions these days. For all these investments, one analyst asked Mr. Szkutak, why are sales not increasing even faster? His answer: Just wait. ... Amazon, which is based in Seattle, long ago transcended its roots as a simple retailer. In recent weeks it introduced Zocalo, a document storage and sharing service that grew out of its fast-growing web services division. It began a program to allow readers to consume as many e-books as they want for a set monthly fee. And it is starting to ship its long-awaited entry in the smartphone sweepstakes. The phone, the result of years of development by thousands of Amazon programmers and designers, is meeting some resistance from reviewers.

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surpising by LduN · 2014-07-25 01:32 · Score: 5, Interesting

Wow look at that... a company that (at least a little bit) cares about the customers at the end, not penny-pinching to make investors happy (for now).
1. Re:surpising by Anonymous Coward · 2014-07-25 01:44 · Score: 4, Insightful
  
  Wow look at that... a company that (at least a little bit) cares about the customers at the end, not penny-pinching to make greedy short-term investors happy (for now).
  FTFY
  Many of us investors do prefer to hold stock in companies that look like they're going to be around for a long, long time.
2. Re:surpising by wisnoskij · 2014-07-25 01:44 · Score: 5, Insightful
  
  Umm... Well, to be clear. They are spending money to develop an iron grip on the industry in the long run. They are willing to lose money, not to be fair to customers, but to develope possibly the strongest monopoly that every has existed, and if left up to Amazon ever will exist.
  
  --
  Troll is not a replacement for I disagree.
3. Re:surpising by Anonymous Coward · 2014-07-25 01:48 · Score: 5, Insightful
  
  Amazon will only seem to care about customers until they drive out all competitors. Then they will act like any other monopoly does.
4. Re:surpising by Anonymous Coward · 2014-07-25 01:56 · Score: 1, Funny
  
  If you think AMAZON is motivated to be "good to customers" I've got a drone-delivered DILDO for your ass!
5. Re:surpising by Raven42rac · 2014-07-25 02:02 · Score: 4, Insightful
  
  They've been doing this for close to 20 years, you think that would be plenty of time to actually make money.
  
  --
  I hate sigs.
6. Re:surpising by segedunum · 2014-07-25 02:12 · Score: 4, Interesting
  
  They don't care about customers. Not making a profit is a ruse that many companies pull to avoid tax and be creative with accounting.
7. Re:surpising by Charliemopps · 2014-07-25 02:20 · Score: 3, Insightful
  
  They've been doing this for close to 20 years, you think that would be plenty of time to actually make money.
  This is the internet... Hype = Profit
8. Re:surpising by Sockatume · 2014-07-25 02:28 · Score: 1
  
  I'm not sure that's true any more. One of the biggest businesses they were trying to compete, entertainment media, with has gone digital and despite their best efforts they're only remotely competitive in the books area. If their goal was to kill off retail stores and then dominate physical media delivery, it looks like they missed the boat by five years.
  
  --
  No kidding!!! What do you say at this point?
9. Re:surpising by msauve · 2014-07-25 02:32 · Score: 3, Insightful
  
  They are making money, just not by selling goods and services - if you bought AMZN back in 1998, you'd have a greater than 6400% profit now.
  
  --
  "National Security is the chief cause of national insecurity." - Celine's First Law
10. Re:surpising by Anonymous Coward · 2014-07-25 02:39 · Score: 0
  
  not sure why this is modded overrated... seems accurate to me.
11. Re:surpising by TheLink · 2014-07-25 02:39 · Score: 2
  
  If it was Japan, China etc doing the same thing they'd be charged with "dumping": https://en.wikipedia.org/wiki/...
  --
  
  Too many replies beneath your current threshold
12. Re:surpising by afidel · 2014-07-25 02:56 · Score: 4, Insightful
  
  Lol, they're less than 1.7% of the retail market, a quarter the size of Walmart and only twice the size of the flailing Sears. Heck, as a percentage of the market they're significantly smaller than the old Sears catalog business used to be.
  
  --
  There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
13. Re:surpising by afidel · 2014-07-25 02:58 · Score: 1
  
  They're not selling goods below cost for the most part, it's just that their expenses eclipse their earnings from sales. This is largely due to capital investments in projects and shipping centers.
  
  --
  There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
14. Re: surpising by Karlt1 · 2014-07-25 03:00 · Score: 4, Insightful
  
  Amazon went public in 1997. How long do long term investors have to wait for consistent profitability?
15. Re:surpising by MozeeToby · 2014-07-25 03:01 · Score: 4, Interesting
  
  That's nice. Now for a thought. Let's imagine Amazon runs a script and raises all their prices, every single one of them, by 1% Would anyone notice? Would anyone care? Is 1% even enough to justify looking elsewhere for a product? They'd still be cheapest on 90% of things, why would anyone bother?
  Guess what, they just boosted their profits by $700,000,000. Ok, lets say some people do shop elsewhere, so call it $600,000,000. Not just their revenues, their actual profits. And investors are running away
16. Re:surpising by trepanne · 2014-07-25 03:02 · Score: 2
  
  Yes, this.
  
  AMZN's game plan is to transform retail by exploiting network effects, economies of scale, lower cost structure, and the ability to shunt costs off to others. They're investing heavily to create a dominating position that will be unassailable by new etrants - see Warren Buffett's comments about economic moats.
  
  They are deliberately running their operations close to break-even from an accrual accounting point of view... their $126M loss sounds large, but it's not very material given their $20B of revenue over the same period. These losses (from low prices) are a crucial part of killing competition and transforming the retail ecosystem permanently. Instead they're focused on keeping enough positive cash flow that they generate enough internal funding to fuel their strategy without continuing to raise significant funding from sales of equity or debt. You need to focus on AMZN's statements of cash flow
  
  2014q2 operating cash flow was $862M - seven times the "swelling losses" making headlines. This didn't quite fund their purchases of property/plant/equipment which were $1,290M... but these kinds of cash sources & uses can be quite lumpy over the course of a single quarter; they maintain a very healthy warchest in corporate treasury as a shock absorber.
  
  That's the game plan. Bezos is very good at it. The investors are on board... foregoing the bird in the hand to reap many more birds from the bush in the feature is what investing is all about.
  
  I have no interest in owning the stock, but that's what those who do are looking at.
17. Re:surpising by Salgat · 2014-07-25 03:09 · Score: 2
  
  You don't need a profit to benefit your investors. As long as your company grows in value, all those who own a share in the company see their own value also increase. Amazon is likely only around because of their long term strategy, which has afforded them the ability to remain relevant through fast shipping, large selection, and their media presence.
18. Re:surpising by Ziggitz · 2014-07-25 03:13 · Score: 1
  
  Amazon is a company that realized if they just stuck with what they had ten years ago they wouldn't still exist today and they're not so stupid to think that doesn't hold true today.
  
  --
  There is no memory shortage. yes I have heard of XFCE. Go away.
19. Re:surpising by bigpat · 2014-07-25 03:25 · Score: 2
  
  They don't care about customers. Not making a profit is a ruse that many companies pull to avoid tax and be creative with accounting.
  Bingo! I was looking to see if anyone else made this comment. As long as Amazon isn't just adding fat to the organization, but is actually reinvesting in growth which will otherwise be profitable, then not making a taxable profit is the best thing an American company could do with its money. Especially if they expect corporate tax relief in the future.
20. Re:surpising by LordLimecat · 2014-07-25 03:37 · Score: 2
  
  How are they going to make the strongest monopoly ever? More stores than ever before are online now. I can literally order everything I need and have it shipped to me, and never touch amazon. Lowes, Giant Foods, clothing stores, Ali Baba, Ebay, all have online stores.
  The barrier to entry is so absurdly low that I dont think anyone needs to worry about Amazon's monopoly, at least in the shopping sector.
  And the barrier to entry for cloud services is pretty low too-- all you need is space at a datacenter (which can be had for relatively cheap) and you can offer a cloud platform.
21. Re:surpising by istartedi · 2014-07-25 03:37 · Score: 3, Funny
  
  And the farmer cares about his pigs so he doesn't butcher them until they get nice and fat.
  Honey, don't log on. That copy of To Serve Man just arrived. It's a cookbook!
  
  --
  For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
22. Re: surpising by Anonymous Coward · 2014-07-25 04:00 · Score: 0
  
  Profits can be taxed. Most investors would rather have profitless growth than a dividend.
23. Re: surpising by Frobnicator · 2014-07-25 04:00 · Score: 5, Interesting
  
  How long do long term investors have to wait for consistent profitability?
  Math time... $126M loss / $19B revenue = 0.66%, less than one percent loss for a quarter. The company is worth about $140B, so the quarter's drop is less than a tenth of a percent, meaning absorbing a the loss is a tiny decrease in a large bucket. In contrast, the skittish investors yesterday cost the company about $12B compared to the $126M business loss. The skittish investors who cause huge overnight drops like this create opportunities.
  We're not talking about a company that is hemorrhaging money. It isn't a company plagued by mismanagement. It is a company that since their first day built a track record of tinkering with models. That is all Amazon has ever done. They have the resources to continue operating when they discover unprofitable ones. It takes money to make money, and many tests and changes cost time and money. Yes, some investors refuse to see the long term and demand a profit every single quarter. Other investors see this as an opportunity to buy or to hold.
  Last night they took a 10% drop because short-term investors are skittish. Today you can buy it at a 10% discount; so thanks skittish investors!
  
  --
  //TODO: Think of witty sig statement
24. Re:surpising by Alomex · 2014-07-25 04:06 · Score: 2
  
  Let's imagine Amazon runs a script and raises all their prices, every single one of them, by 1% Would anyone notice? Would anyone care?
  Yes, as every one with retailing experience can tell you it's a cutthroat business with profit margins in the 1-3% range, so a 1% change is huge.
25. Re:surpising by Anonymous Coward · 2014-07-25 04:09 · Score: 0
  
  Short term? Amazon hasn't turned a profit in more than a decade. It's not being greedy or short-sighted to expect a return some time before the end of this century.
26. Re: surpising by Anonymous Coward · 2014-07-25 04:13 · Score: 0
  
  the skittish investors yesterday cost the company about $12B
  
  Let's be honest here, Amazon lost nothing yesterday. The only money that they got was from the IPO, and that has long been used. Short term investors that bought stock since Jan will have lost when they sell, but if you bought before August 2013, you'd would have made something even at today's prices.
27. Re: surpising by Hussman32 · 2014-07-25 04:13 · Score: 1
  
  Down four, buy more!
  
  --
  "Who are you?" "No one of consequence." "I must know." "Get used to disappointment."
28. Re: surpising by Kelbear · 2014-07-25 04:38 · Score: 1
  
  Well here's a counterpoint view:
  http://seekingalpha.com/articl...
  It has a lot of charts and modeling that I don't understand, but at a high-level view, this analyst pins the lack of profitability to Amazon's revenues growing in less profitable business ventures while growing relatively slower in the more profitable business lines. In 2002, 78.8% of revenues were from Media, 19% EGM, and 2.2% Other. In 2014, it's 29.6% Media, 64.8% EGM, and 5.5% Other. Media has much bigger profit margins than EGM(electronics and general merchandise), and the company's weight has shifted heavily behind EGM. AWS has good profit margins, and will grow quickly as it's a relatively new and blossoming business arm, but it's unlikely to grow to the kind of size that would shift Amazon's sales mix away from EGM. Under this guy's reasoning, this means we can expect Amazon's profit margins to continue to bump along the bottom tied to the low margins on EGM, and can't foreseeably create the kind of high margins on EGM that would justify it's high share price, since it's an extremely price sensitive business. It makes this stock questionable in the long-term.
  Nevertheless, I still bought shares today because it's a 10% discount off of one earnings report that doesn't show some kind of underlying catastrophe. They'll probably rebound to some degree within a year. And hey, I don't have that author's powers of analysis, but maybe Amazon's shotgun strategy of trying to find new ways to grow their business will find a winner (This latest phone isn't going to be it, but maybe something else will be).
29. Re:surpising by Anonymous Coward · 2014-07-25 04:46 · Score: 0
  
  You don't need a profit to benefit your investors. As long as your company grows in value, all those who own a share in the company see their own value also increase. Amazon is likely only around because of their long term strategy, which has afforded them the ability to remain relevant through fast shipping, large selection, and their media presence.
  
  You're begging the question - your concept of "grows in value" - by what means ought we to measure the value of a company?
  At the end of the day the value of a company is the net present value of all future profits. It doesn't matter whether you distribute the earnings to investors in the form of dividends or reinvest it in your business (or other businesses) to make yet more money. But you do have to make money.
  The stock price isn't the value of the company. The stock price is the opinion that other investors have about what your future profitability will be. AMZN is a much larger company than it was in 1997, and with near-monopoly power, could be very profitable, so investors are willing to gamble that Bezos might do so. If Bezos' actual strategy (to pull a completely ridiculous example out of my hat) is to spend 100 years gaining a monopoly on all Terran commerce and interplanetary trade, however, he will find very few investors willing to hold his stock, because most of them will be dead before they see a penny of return.
  I'd rather own 1% of AMZN than 100% of some startup that failed. But if AMZN isnt' going to show a profit in my lifetime, I'd rather own 0.00001% of AOL or FB or TWTR or LNKD, or even garbage like GRPN or ZNGA or KING if I could get them at pre-Stage-1-funding prices, and dump it the day of the IPO, and lather, rinse, repeat that process every few years as each successive fad evaporates.
30. Re: surpising by Anonymous Coward · 2014-07-25 04:49 · Score: 0
  
  Non-sequitur. You write as if you have an expectation that long-term investment must have consistent short-term growth. Yet the very notion of long-term investment strongly hinges on companies which make daring moves to reach new markets, to avoid their extant market possibly drying up and the company going defunct, or even more established to have off-years in an otherwise consistent sell record in a niche market, as there are economic up turns and down turns that effect the spending habits of otherwise habitual spenders. Especially when it comes to Amazon, which has a long history (until 2009) of being unprofitable, there should be an expectation by long-term investors that profitability is a really long-term plan with plenty of unprofitable years along the way.
  PS - One of the comments I made a long time ago was the notion that Amazon would fail precisely because investors wouldn't tolerate this consistent loss history and it seemed clear they just didn't know how to be profitable. In retrospect, I realize that the truth is there were much wiser investors who saw that Amazon in seeking to grow out had to spend more than even its revenue to become THE online retailer. Seeing as they've mostly, if not entirely, managed that--and their position has created a sort of monopoly which allows them very choice revenue from marketplace sellers who go through them--, it's little wonder that Amazon might be looking even further and trying to build an even larger empire. I have no idea if they'll succeed or not (or if it's a good investment), but I'm much quick today to discount what might be a very clear vision any more than I discount Google and its many costly projects even if most never pan out.
31. Re: surpising by Anonymous Coward · 2014-07-25 04:53 · Score: 0
  
  I'll take that as a good sign. Over that same time we've watched media houses that were booming in 1997 when CDs were a big deal almost universally die off. It's also a company that was almost exclusively a media company. In 2002 it did less than $5B in revenue. It's diversified and aside form a few niche players (Apple) big growth tends to come in lower margins.
32. Re:surpising by Anonymous Coward · 2014-07-25 04:56 · Score: 0
  
  That sort of reasoning doesn't stop countries from being charged with anti-dumping stuff either.
33. Re:surpising by Zxern · 2014-07-25 05:03 · Score: 1
  
  What the value of the shares you bought going up doesn't count as a return anymore?
34. Re:surpising by Columcille · 2014-07-25 05:17 · Score: 1
  
  Setting prices to undercut - and diminish - competitors isn't quite the same as caring about customers.
  
  --
  I love my sig.
35. Re:surpising by Anonymous Coward · 2014-07-25 05:18 · Score: 0
  
  Define profit.
  Money? stock prices have increased from ~85 to ~330 (High of ~402) in the last 5 years. Not a red cent of dividends, yet those who have been in it for the long haul have a %300+ return in 5 years. Go back further, and the increase is higher. https://www.google.com/search?{google:acceptedSuggestion}oq=amazon+stock&sourceid=chrome&ie=UTF-8&q=amazon+stock
  They are also arguably one of the most diverse and powerful companies on the planet, and aren't going anywhere anytime soon...
  I wish I could loose .5% of my annual income and have the world go ape shit... .. .
36. Re:surpising by Anonymous Coward · 2014-07-25 05:44 · Score: 0
  
  The value of a company is its assets minus its liabilities plus the expectation of future earnings. You can grow the value of a company by growing assets or reducing liabilities without ever turning a profit.
  Amazon is reinvesting all of the money it makes into growing the business. When you do that it is called an expense, offsets your revenue for tax purposes and means you don't show a profit in your financials.
37. Re:surpising by ebusinessmedia1 · 2014-07-25 05:50 · Score: 1
  
  Just goes to show that most investors are lemmings.
38. Re:surpising by alexander_686 · 2014-07-25 06:00 · Score: 1
  
  Profits can either be defined as earnings (revenue - costs) or beter yet, Free Cash Flow (FCF) to shareholders.
  As to your point, you are confusing profits (a flow variabole, found on the income statement) with wealth (found on the balance sheet.). The "profits" you are pointing to are being caused by low intrest rates which causes future earnings to be more vaulabe. This has nothing to do with the current disccusion, how should Amazon increase it future earnings – by paying it profits in cash to it's shareholders or by reinvesting in new, risky ventures. (The answer, of course, is both – the tricky part is finding the correct balance.)
  To explain, the stock market has not jumped up because of increased profits or expected income profits (there is some of that). It is because the Price to Earnings level has jumped to 20x. A better way of saying this is that the Earnings to Price has fallen to 5%, tracking the fall in 10 year US Government bonds, down to a Coupon to Price Yield of 2.5%. As intrest rates fall, the discounted time value of future profits increase.
  Bill Gross, from Pimco, explaining why 20x P/E ratio may not be high.
  http://www.pimco.com/EN/Insigh...
39. Re:surpising by sexconker · 2014-07-25 06:05 · Score: 1
  
  What the value of the shares you bought going up doesn't count as a return anymore?
  It only counts as profit if you sell before the bubble bursts.
  If Amazon remains unprofitable, investment firms will decide to dump the stock one day, cashing out and killing the value of the stock.
  Even if individuals hear about the stock dropping 10 seconds after it starts, it's too late. They'll be fucked.
40. Re:surpising by Anonymous Coward · 2014-07-25 06:06 · Score: 0
  
  They make plenty of money, they simply pump every bit of money they make into new infrastructure. They have grown their net worth to 90 billion. This isn't just 90 billion in imaginary money, its in tons of warehouses, inventory and employees.
41. Re:surpising by Anonymous Coward · 2014-07-25 06:22 · Score: 0
  
  "If only" are words you should never utter when talking about investment.
  If I had bought $5k in AAPL in 1998 instead of that PowerMac G3, I'd have had roughly $2.8M worth of stock when it was $700/share. If only...
  Never invest when thinking about "if only". It will lead you into failure. Emotions have no place in investment.
42. Re:surpising by mcrbids · 2014-07-25 06:25 · Score: 1
  
  On the Internet... Hype = Sucker Investors.
  
  There, FTFY.
  
  --
  I have no problem with your religion until you decide it's reason to deprive others of the truth.
43. Re: surpising by Anonymous Coward · 2014-07-25 06:34 · Score: 0
  
  It makes this stock questionable in the long-term.
  As long as big-box retailers keep declaring bankruptcy, I have no concerns about Amazon's future. People aren't going to stop buying things, nobody is even close to Amazon in web retail (despite everybody and their mom attempting it).
  It's going to come down to Walmart vs Amazon, and the world is big enough for both of them. I'm a content shareholder of both.
44. Re:surpising by praxis · 2014-07-25 06:40 · Score: 1
  
  If you bought AMZN back in 1998, you'd have a greater than 6400% profit now.
  Only if you sold the stock now.
45. Re:surpising by 0123456 · 2014-07-25 06:52 · Score: 1
  
  They've been doing this for close to 20 years, you think that would be plenty of time to actually make money.
  Dude, making money is just so 19th century.
46. Re:surpising by alexander_686 · 2014-07-25 06:58 · Score: 1
  
  Not quite.
  The "book value" of equity, from the balance sheet, is assets minus liabilities. It is a accounting principle.
  The "market value" of equity is the discounted (time / risk) value of expected future earnings. It is the general consensus of the stock market.
  These two concepts rarely meet in real life.
47. Re: surpising by aztracker1 · 2014-07-25 06:59 · Score: 1
  
  I actually appreciate Amazon's approach.. imho a business should either expand/invest or return dividends... I don't like companies that simply bank significant profits or hold onto under-utilized assets for years. Amazon uses its assets. Also, the share price has grown to reflect this overall growth in value, while not specifically paying out dividends... Good for them, this is a very small blip, and you're right, I don't think their phone is the answer.. maybe at a sub $400 out of contract price (in line with the Nexus phones from Google).
  
  --
  Michael J. Ryan - tracker1.info
48. Re:surpising by thetoadwarrior · 2014-07-25 07:08 · Score: 1
  
  How is making yet another mobile phone based on Android any good for consumers? Given that smartphones peaked and there's not really any innovation left so the only logical reason for doing it is to lock consumers into Amazon's ecosystem which isn't a consumer friendly action.
49. Re:surpising by Anonymous Coward · 2014-07-25 07:17 · Score: 0
  
  Wrong. It is their number one creed. Start with their customer experience. "Customer" may be in-house devs.
50. Re:surpising by alexander_686 · 2014-07-25 08:58 · Score: 1
  
  Of their 144b enterprise value, only 15b is long term assets (i.e. infrastrucure) and 24b in short term assets (inventory). They don't own any employees
  Most of the value is projected earnings, and those projections assume a good deal of growth in earnings - say 30%+ over the next 10 years.
51. Re:surpising by NoKaOi · 2014-07-25 09:13 · Score: 1
  
  The barrier to entry is so absurdly low that I dont think anyone needs to worry about Amazon's monopoly, at least in the shopping sector.
  The barrier to entry is significant. Not necessarily on the logistics/shipping side, but most certainly on the marketing side. In Q2 of 2014, Amazon spent $943 million on marketing. In 2013, they spent $3.1 Billion (yes, with a "B") on marketing. How money potential online retail start-ups have even a fraction of that amount? The online retail market isn't a "if you build it they will come" thing, hasn't been for awhile. You either need a really innovative and unique product to sell to carve out a yet-to-exist niche, or marketing to drive customers to you instead of the other guys.
52. Re:surpising by SillyHamster · 2014-07-25 09:21 · Score: 1
  
  but to develope possibly the strongest monopoly that every has existed, and if left up to Amazon ever will exist.
  How the hell does an internet retail company develop a monopoly?
  Pass laws banning brick and mortar? Hack their competitor's websites? Buy out UPS and FedEx?
53. Re:surpising by Anonymous Coward · 2014-07-25 12:12 · Score: 0
  
  Employees of Market Basket (grocery store) are striking because their favored CEO and a few other top exes were fired a few weeks ago. Such things are rare.
54. Re:surpising by mattwarden · 2014-07-25 12:23 · Score: 1
  
  > monopoly
  You mean a monopoly where competitors can't deliver that kind of value to customers? How terrible.
55. Re:surpising by farble1670 · 2014-07-25 12:43 · Score: 1
  
  I can literally order everything I need and have it shipped to me, and never touch amazon. Lowes, Giant Foods, clothing stores, Ali Baba, Ebay, all have online stores.
  yep, and you have to remember your logins for all those stores, go through a lengthy registration process re-entering your CC info, addresses, and so on.
56. Re:surpising by mattack2 · 2014-07-25 14:17 · Score: 1
  
  Wow look at that... a company that (at least a little bit) cares about the customers at the end, not penny-pinching to make investors happy (for now).
  Wait, you're commenting in the wrong article. You must have been meaning to comment in an Apple article.
57. Re: surpising by bondsbw · 2014-07-25 15:30 · Score: 1
  
  Amazon had other days this year with worse drops, towards the end of January and also in April. The current stock price is the same as it was less than a month ago. I don't really see why this is even a story.
  
  --
  All my liberal friends think I'm a conservative, all my conservative friends think I'm a liberal.
58. Re: surpising by countach · 2014-07-25 15:36 · Score: 1
  
  "We're not talking about a company that is haemorrhaging money"
  Well you only say that because its a 140 B company. But if investors suddenly decide this thing is never going to make money, it could suddenly be a 1B company. 126M loss in the context of a 1B company is huge. Until they actually make consistent money, who's to say how much this ship is worth? Could be worth nothing.
This is how business should be done by Anonymous Coward · 2014-07-25 01:33 · Score: 1

Short term profits are not everything, I am happy Amazon is willing to take the risk and spend the money for long term goals and gains. Wall Street needs to get over its obsession with quarterly reports.
1. Re:This is how business should be done by FearTheDonut · 2014-07-25 01:46 · Score: 2
  
  Yes, I agree with this. But, at some point, investors need to get a return on their investment: it's what they asked for and it is required by law. The have never paid a dividend (as far as I can tell), and so their stock price is the only real way to get a return on the investment. At what point does "avoiding short-term profits for long term gains" become a losing bet? When does "long term" happen? That's what investors want to know.
2. Re:This is how business should be done by Anonymous Coward · 2014-07-25 01:53 · Score: 0
  
  It can be centuries if the board so agrees.
3. Re:This is how business should be done by wisnoskij · 2014-07-25 02:01 · Score: 2
  
  Yes, and stock price is not cemented to profits.... Stock climbs as the influence of the company climbs. FB is a famous company that never made any profits, or even showed any ability to ever produce profits, that still had a tremendously good stock evolution. Or you could just look at Amazon's Stock Price, to see that it has been climbing and climbing and climbing, making their investors money (over the last 4 years alone it has gone up to 5 times its starting value).
  
  --
  Troll is not a replacement for I disagree.
4. Re:This is how business should be done by Anonymous Coward · 2014-07-25 02:13 · Score: 1
  
  But, at some point, investors need to get a return on their investment: it's what they asked for and it is required by law.
  Nope. This is a gross (and on slashdot, quite common) misunderstanding of what rights shareholders actually have. You cannot sue (or at least, you cannot successfully sue) a company you own stock in simply because you think they aren't being run well. As long as the company is managed more or less in-line with what is described in their prospectus, there is no basis for a lawsuit: they were completely up front (in very general terms) about how they intend to run their business. You have no right to demand (eg) that they focus on short term growth unless the prospectus gives good cause for you to believe that they would.
5. Re:This is how business should be done by Rhipf · 2014-07-25 02:38 · Score: 1
  
  OK I'll admit I don't know much about business (or law) but is it really "required by law" for companies to give investors a return on their investments?
  If this is actually true I guess I need to start investing some money.
6. Re:This is how business should be done by sjames · 2014-07-25 03:16 · Score: 1
  
  There is no such law. They are only required to make a best effort at a profitable company. Since nothing dictates the timeframe, they are free to play a long game so long as they can credibly claim that they genuinely BELIEVE that their actions will lead to long term profits.
  Investors that were looking for a fast turnaround are free to look elsewhere. Investors that don't believe their plan will succeed are likewise welcome to move on.
7. Re:This is how business should be done by Anonymous Coward · 2014-07-25 04:31 · Score: 0
  
  No. People who like to pretend they dislike corporations say this as a way to justify their position.
8. Re:This is how business should be done by alexander_686 · 2014-07-25 06:15 · Score: 1
  
  Stock prices have nothing to do with "influence of the company climbs" - I am not even sure what that nebulas term mean.
  Stock prices are based on the discounted value for future profits (well, Free Cash Flow if you want to be technical). To use your example, FB is currently valued at 80x of price to earnings (Yes, FB has profits). The reason why it is valued at 80x P/E instead of the S&P 500's P/E of 20x, it is because of expected growth in profits. Same thing when FB was first starting out and had losses. Who cares about current profits and losses? That is water under the bridge. When you buy a stock it is because of expected future profits.
9. Re:This is how business should be done by alexander_686 · 2014-07-25 06:21 · Score: 1
  
  Not quite true. The board (and by extension, the CEO) have a fiduciary duty to run the company in the best interest of the shareholders, which means maximizing returns, factoring in risk. Boards and CEOs have been sued for this. Now, the courts have taken a very wide broad interpretation of this, normally deferring to the board decisions. Most of the time when the shareholders believe the board is incompetent they either sell their shares (flight) or start a proxy war (fight)
10. Re:This is how business should be done by Anonymous Coward · 2014-07-25 07:00 · Score: 0
  
  The board (and by extension, the CEO) have a fiduciary duty to run the company in the best interest of the shareholders, which means maximizing returns, factoring in risk.
  No, again, this is simply not true. It gets repeated here over and over (and over and over and...), but there is simply no basis for a lawsuit unless the company is:
  (a) not acting in accord with their prospectus
  (b) acting non-optimally for nefarious reasons (eg, giving business to the CEO's brother's company without establishing that they are the best choice)
  (c) acting grossly incompetently
  The third may sound like it is what you are describing; but it is not, at all. A company acting in accord without its prospectus (and although I haven't checked, I would be rather shocked if Amazon's prospectus did not emphasize reinvesting profits in the company) is not grossly incompetent, even if you disagree with them.
  It is certainly possible -- and indeed it does occasionally happen -- that a company is so hideously mismanaged that there is a shareholder lawsuit. But the average slashdotter seems to think that anything short of naively optimizing this quarter's profits is grounds for a lawsuit, and it simply is not and has never been.
11. Re:This is how business should be done by alexander_686 · 2014-07-25 07:50 · Score: 1
  
  I think we are mostly on the same page. My point, maximizing return in a risk / reward framework does not imply maximizing earnings this quarter. We may be arguing over language rather than concepts.
  On the prospectus point I disagree. Common law and securities laws (examples would be the Securitas Act of 1933 and 1934) put additional fiduciary duties on the board and CEO that require them to work in the best interest of the shareholders. The prospectus says that the board can set the pay for the board and CEO with no restriction. The law prevents the board from confiscating a generous (or even all) of the profits for their pay. (This is kind of like your B example, but I will point out that is covered by law, not the prospectus.) See Tyco and Adelphia as blatant modern day examples. For a more subtle example, look up the various lawsuits between Craig's List and Ebay (a minority shareholder).
  I personally feel you put too much emphasis on the prospectus. Yes, the prospectus 20 years ago talked about reinvesting profits – they had to fend off entities like Pets.com and Toys.com. Most companies (and their business environments) have evolved enough that 20 year old boiler plat language is no longer applicable. (The one exception to this might be mutual funds, which must issue a new prospectus every year. However, even than there is a whole host of rules that govern what a mutual fund can and can not do.)
  http://en.wikipedia.org/wiki/T...
  http://en.wikipedia.org/wiki/A...
12. Re:This is how business should be done by afgam28 · 2014-07-25 17:49 · Score: 1
  
  Ever noticed how Amazon consistently breaks even every quarter? Sure there's like a hundred million loss, or sometimes profit in other quarters, but that's nothing when quarterly revenue is $20 billion. The company knows how much money is coming in, and they're using all of their profit to invest in their infrastructure, and grow out their businesses. They could decide at any moment to stop doing this, and the company would become hugely profitable overnight.
  But their revenue last quarter is about 25% higher than it was this time last year, and it has consistently been seeing this kind of growth for years. The right thing for Amazon to do, from a shareholder's perspective, is to keep investing and ride out this wave of growth for as long as it lasts. To do otherwise would be to give up their long-term position just to maximize their short-term quarterly profits.
  So to answer your question, "long term" happens when sales growth disappears, and the investments that Amazon makes into its infrastructure no longer provide any returns. With the sales growth that Amazon is seeing right now, this is clearly not the right time to stop building out the company.
Taken out of context by Anonymous Coward · 2014-07-25 01:39 · Score: 1, Funny

"We're not trying to optimize for short-term profits," Thomas J. Szkutak, the chief financial officer, said
That's right, they are "capitalizing on long term losses" instead.
Avoiding Amazon Web Services? by FearTheDonut · 2014-07-25 01:42 · Score: 3, Interesting

As a software engineer who is often asked to consider "the cloud," at what point should things like poor company performance impact software design decisions? It's easy to say not to use the cloud, but the cost savings for some make it irresistible. I suppose at some point AWS might go away due to a CEO change, corporate shift, etc., but I have a feeling that, with all of the consumer services using AWS, it will be considered "too big to fail," and be required to stay up (and, therefore, I won't have any reason to consider AMZN's performance as a software design concern.

Anyone have thoughts on this?
1. Re:Avoiding Amazon Web Services? by FearTheDonut · 2014-07-25 01:43 · Score: 5, Funny
  
  Besides poor punctuation, missing end parenthesis, and way too many commas.
2. Re:Avoiding Amazon Web Services? by netsavior · 2014-07-25 02:00 · Score: 2
  
  In my opinion AWS is the most mature and the most flexible of the "big enough to matter" cloud providers. I don't foresee them stopping this service any time soon, but if they did, the chances that some other provider would provide a "turnkey" migration from AWZ to their service are very very good.
  
  Not much will need to be changed if you use some other provider...
  
  Just wrap the hell out of your S3 specific code for when thee next trend in "CEO Beat" magazine is "Self Hosting - How to cut your cloud budget to zero!"
3. Re:Avoiding Amazon Web Services? by Anonymous Coward · 2014-07-25 02:00 · Score: 0
  
  In the same sense that Google Search might go away after a CEO change.
4. Re:Avoiding Amazon Web Services? by FearTheDonut · 2014-07-25 02:33 · Score: 4, Insightful
  
  Great. I get marked a "Troll" for trolling my own post..
5. Re:Avoiding Amazon Web Services? by swb · 2014-07-25 02:35 · Score: 1
  
  One question might be "What business is Amazon in?"
  They almost feel like one of those somewhat out of fashion companies that owns a whole bunch of businesses that are only tangentially related. Are they a consumer electronics company? A hard goods company? A clothing company (Zappos, and Amazon's fashion wing)? A bookseller? An internet services company?
  With regard to the last one, maybe AWS isn't a long-term business but a medium-term strategy to sell their own excess capacity to cover the cost of having excess capacity in the near term and gain specific expertise in managing large, distributed computing environments almost 100% under their control.
  At some point in a more mature Amazon business, does AWS go away because they no longer need to cover their own excess capacity? I'm guessing that AWS will be big enough business not to, but Amazon's kind of amorphous business model seems to add some uncertainty.
6. Re:Avoiding Amazon Web Services? by netsavior · 2014-07-25 02:54 · Score: 1
  
  Awesome. Made me laugh.
7. Re:Avoiding Amazon Web Services? by Guspaz · 2014-07-25 02:58 · Score: 1
  
  AWS is estimated to represent about $3 billion in revenue to Amazon, it's been a very long time since it had anything to do with Amazon's excess capacity.
8. Re:Avoiding Amazon Web Services? by Guspaz · 2014-07-25 03:00 · Score: 1, Troll
  
  You don't move to AWS if you care that much about budget; among cloud providers, they have some of the highest costs, and lowest performance. They're also one of the most flexible (in terms of what you can do), but there are a lot of mature cloud providers out there that will give you the same performance for a fraction the cost. Just not necessarily the breadth of services.
9. Re:Avoiding Amazon Web Services? by afidel · 2014-07-25 03:07 · Score: 2
  
  AWS started as a way to gain revenue from the spare capacity they had for cyber monday, but it's now ~200x the size of Amazon's actual needs and is its own revenue and profit center. If a new CEO wanted to at this point he could spin it off into a separate company with contracts to host services for Amazon. I'm honestly not sure what it would gain you other than access to a pile of capital to use elsewhere, but for the time being Amazon doesn't seem to be hurting for access to capital.
  
  --
  There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
10. Re:Avoiding Amazon Web Services? by mlts · 2014-07-25 03:31 · Score: 3, Interesting
  
  I think AWS is the primary brand for cloud services, with Azure right on its heels, then other providers (Rackspace, etc.)
  Amazon has some unique services that nobody else has. Glacier comes to mind for long term storage [1]. There are other services they provide which can be useful.
  Amazon is not going anywhere... the shareholders may be unhappy right now... but it isn't like Amazon's market is drying up anytime soon. They are the only big company which can fight Wal-Mart and win on price alone. [2] If Amazon so chose, they could actually wage a battle on every front Apple is making money on, and actually make headway. Very few companies can do this.
  Even if Amazon "failed", the cloud part would be spun off to a different entity. If not, because of all the critical data on AWS... Amazon almost certainly would receive a bailout, just like the car makers did.
  [1]: Glacier is not going to replace a normal offsite volume anytime soon. The cost for uploading and storing is very reasonable. However, you do pay for accessing the data. If you use this for backups (I use it as the media of absolute last resort), it can be a useful tool.
  [2]: This isn't a good thing with the race to the bottom, but a notable point.
11. Re:Avoiding Amazon Web Services? by Gr8Apes · 2014-07-25 04:03 · Score: 1
  
  You don't move to AWS if you care about budget, uptime, control, security, nor ownership of your data and software.
  * Budget - cheap to free to develop on, rapidly escalating costs for enterprise usage.
  * uptime - AWS has had notable outages with relatively long recovery times. It's happened more than once.
  * control - see uptime - you had no options when that happened.
  * security - ultimately, you cannot control security if you don't have the hardware, or even software, under your control
  * ownership - since you don't own the hardware nor software, all your data and software placed on the server is there for anyone with access to see. And there are people with access.
  
  --
  The cesspool just got a check and balance.
12. Re:Avoiding Amazon Web Services? by sootman · 2014-07-25 06:14 · Score: 2
  
  Could have used a <strong> tag that was never closed and some its/it's confusion. Maybe an apostrophe before the "s" at the end of a plural noun. Otherwise, solid post. Would read again.
  
  --
  Dear Slashdot: next time you want to mess with the site, add a rich-text editor for comments.
13. Re:Avoiding Amazon Web Services? by Anonymous Coward · 2014-07-25 07:01 · Score: 0
  
  And insightful for pointing it out...
14. Re:Avoiding Amazon Web Services? by Richy_T · 2014-07-25 12:33 · Score: 1
  
  Unfortunately, when cyber Monday does come around, between them and the other retailers using their services, they often seem to have insufficient capacity. We frequently were unable to spin up new instances around that period. When you have people sitting around waiting to do work, that quickly starts to eat into any savings.
15. Re:Avoiding Amazon Web Services? by Richy_T · 2014-07-25 12:35 · Score: 1
  
  Amazon is unionized? That's why the auto makers got the bailouts.
We lose money on every sale... by west · 2014-07-25 01:46 · Score: 1

"We lose money on every sale, but we make it up in volume" has never been as true as with Amazon.
(No, it's not literally true - but investors seem pleased to accept below-market returns (if not indeed losses) forever... If only the rest of American businesses had owners willing to give all their money to their customers.)
I'm doing my best to keep them afloat by nani+popoki · 2014-07-25 01:47 · Score: 1

I've bought over 1300 eBooks from their Kindle library. At $3 to $4 each... well, a Slashdot reader can certainly do the math.
1. Re:I'm doing my best to keep them afloat by wisnoskij · 2014-07-25 01:50 · Score: 1
  
  Why?
  
  --
  Troll is not a replacement for I disagree.
2. Re:I'm doing my best to keep them afloat by CrankyFool · 2014-07-25 01:58 · Score: 5, Funny
  
  Probably because, we expect, that Slashdot readers are generally comfortable enough with elementary math to be able to either multiply $1300 by 3 ($3900) or 4 ($5200), or has easy access to a calculator.
3. Re:I'm doing my best to keep them afloat by Anonymous Coward · 2014-07-25 02:13 · Score: 0
  
  That "why" was probably more referring to the subject "doing best to keep them afloat" implying purposely going out of his way to make purchases on amazon while in reality probably saying that jokingly.
4. Re:I'm doing my best to keep them afloat by KingOfBLASH · 2014-07-25 02:23 · Score: 1
  
  I second that. I'm at 300+ books (although I have a tendency to buy professional reference materials that are $50+)
  Kindle is awesome. Easy access to English language books (I live abroad, try finding the latest anything in Vietnam), it's searchable (great for reference books), and I own two kindles so I can keep an entire kindle of reference books in my desk without a huge footprint.
5. Re:I'm doing my best to keep them afloat by wisnoskij · 2014-07-25 02:27 · Score: 2
  
  Actually it was referring to the reason behind purchasing 1300 ebooks.
  
  --
  Troll is not a replacement for I disagree.
6. Re:I'm doing my best to keep them afloat by dohnut · 2014-07-25 02:49 · Score: 2
  
  “I was in Nashville, Tennessee last year. After the show I went to a Waffle House. I'm not proud of it, I was hungry. And I'm alone, I'm eating and I'm reading a book, right? Waitress walks over to me: 'Hey, whatcha readin' for?' Isn't that the weirdest fuckin' question you've ever heard? Not what am I reading, but what am I reading FOR? Well, goddamnit, ya stumped me! Why do I read? Well . . . hmmm...I dunno...I guess I read for a lot of reasons and the main one is so I don't end up being a fuckin' waffle waitress.” -- Bill Hicks
  But seriously, why? Why buy from Amazon or why buy at all (i.e. pirate)? Or is it why buy 1300 books? I know several people that can easily read an entire (200-300 page) book in just a few hours. One of them reads at least one book per day -- this is in addition to having a life. I'll never read 1300 books but they will have no problem doing it.
  
  --
  Stupider like a fox! - H.S.
7. Re:I'm doing my best to keep them afloat by WilyCoder · 2014-07-25 03:42 · Score: 1
  
  ...because the OP likes to read?
8. Re:I'm doing my best to keep them afloat by Anonymous Coward · 2014-07-25 03:46 · Score: 0
  
  Why would anyone buy 1300 eBooks? To read them, obviously. DUH.
9. Re:I'm doing my best to keep them afloat by nani+popoki · 2014-07-25 04:27 · Score: 1
  
  I do read a lot, mostly for entertainment. I'm averaging about three novels a week. I love that I can pack a dozen books for a trip without worrying about overweight luggage charges. At the price I'm paying per book, I'm now reading in more genres and reading more authors in the genre I always read a lot of. My model of Kindle doubles as an MP3 player, so I can have my tunes along as in-flight entertainment, too.
10. Re:I'm doing my best to keep them afloat by Anonymous Coward · 2014-07-25 04:45 · Score: 0
  
  Presumably it is because the OP likes to read.
11. Re:I'm doing my best to keep them afloat by Anonymous Coward · 2014-07-25 09:32 · Score: 0
  
  I know people that can sit and watch five movies in a day. I don't know anyone that has purchased 1300 movies.
12. Re:I'm doing my best to keep them afloat by Ksevio · 2014-07-25 09:57 · Score: 1
  
  Probably because he likes reading and wanted to read those 1300 books
13. Re:I'm doing my best to keep them afloat by Richy_T · 2014-07-25 12:36 · Score: 1
  
  They look impressive on the e-bookshelf.
14. Re:I'm doing my best to keep them afloat by Richy_T · 2014-07-25 12:39 · Score: 1
  
  One could be reading for a test or pleasure or some imminent need. It probably is in how the question is asked.
.7% by wisnoskij · 2014-07-25 01:49 · Score: 4, Insightful

That is not a loss, that is breaking even.

Yes, between the profits that they could be making, and them breaking even, they are "losing" money in some senses. But in terms of real world "losses" , they are not swelling or piling up, they are just spending their money as fast as it is coming in; And at the end of the year breaking even (within a percentage of a 1 percent).

--
Troll is not a replacement for I disagree.
1. Re:.7% by west · 2014-07-25 02:17 · Score: 2
  
  Given the opportunity cost of the money an investor spent on buying Amazon stock, it's pretty much effectively a loss.
  Heaven help Amazon if its investors ever start demanding actual market returns. Luckily, it may never happen. By now, every investor has got to realize that Amazon's profits will never justify their stock price. Yell that the profits aren't high enough, and all you're doing is yelling that "the Emperor has no clothes", when you're invested in the Emperor.
  Far better to praise Amazon's moves and sell it even higher to the next investor.
2. Re:.7% by macromorgan · 2014-07-25 02:26 · Score: 2
  
  Breaking even for them is more along the lines of a 7% profit. Anything below that is a loss. If Amazon makes 0.7% profit investing in itself or makes 7% investing in the market in general (like an S&P 500 index fund which averages year to year around 7%), 0.7% represents a loss of 6.3% not a profit of 0.7%.
3. Re:.7% by msauve · 2014-07-25 03:07 · Score: 1
  
  AMZN in 1997 was $4. It's over $300 now. How is that "effectively a loss?" If you want to pick specific dates to make your point, I can do the same for some other company which makes real profits, and show a loss for investors.
  
  --
  "National Security is the chief cause of national insecurity." - Celine's First Law
4. Re:.7% by theshowmecanuck · 2014-07-25 03:22 · Score: 1
  
  This sounds more like you are describing Amazon shareholders making 6.3% less than what shareholders of other companies might make. That is not a loss to the company. You do understand that shareholders and the company are different entities don't you? You exhibit the warped logic that drives cowtowing to short sighted shareholders (I think calling them investors after this long in business might be disingenuous) who want immediate gratification and not to long term stable growth. If someone doesn't like it, they can sell their shares. That won't affect cash flow to the company, only a shareholder or share buyer. Maybe if we know if the profit/loss on the balance sheet includes payment to actual initial investment to venture capitalists... they are the ones who really need a set rate of return since at that point they ARE the company. But shareholders aren't, necessarily. I think that was the basis of the SCOTUS saying corporations are individuals. Sure if a block of shareholders large enough got together they could force short term returns to increase over long term stability and growth they can, and often do. Maybe this time we see the return of blue chip thinking. It is the kind of thinking needed to get North America back on the road to success in my opinion. Less drive to offshore for short term goals.
  
  --
  -- I ignore anonymous replies to my comments and postings.
5. Re:.7% by sjames · 2014-07-25 04:18 · Score: 1
  
  In other words, it's fucked up market math. The same screwy math that claims adding $0.05 cost to a bill of materials will magically increase the retail price by $5.
  0.7% profit may or may not be worthwhile, but it is not a loss. They can run forever on that.
6. Re:.7% by tomhath · 2014-07-25 06:13 · Score: 1
  
  You have confused investing in the company's stock (profitable) with the company's operations (not so profitable). That said, it seems Amazon is rolling their money back into growing the business rather than building a cash hoard the way Apple did. It appears that investors are happy either way for a while, then they want to see some of the money.
7. Re:.7% by msauve · 2014-07-25 06:50 · Score: 1
  
  You're the one who's confused. I was responding to the GP, who claimed "Given the opportunity cost of the money an investor spent on buying Amazon stock, it's pretty much effectively a loss."
  
  Amazon increased their net assets by about $3/share FY12-FY13 (on revenue per share of ~$170, so less than 2%), so re-investment doesn't explain their lack of significant bottom-line profits. They're just working on low margins.
  
  --
  "National Security is the chief cause of national insecurity." - Celine's First Law
8. Re:.7% by gabebear · 2014-07-25 07:43 · Score: 1
  
  The specific dates for 0.7% loss(not profit) was Q2 2014. In 1998 Enron was trading at $25 and by 2000 it was over $80!
  
  Past Performance Is Not A Guarantee Of Future Returns...
9. Re:.7% by Richy_T · 2014-07-25 12:44 · Score: 1
  
  Yup. I would prefer if companies returned dividends rather than grow into huge behemoths but I understand why they don't (government) and to investors, it usually makes little difference (Though I think if government interference were removed, dividends would provide better value).
10. Re:.7% by countach · 2014-07-25 15:38 · Score: 1
  
  He has a point that there is an opportunity cost. Whether it be the cost of owning the shares, or the cost of Amazon's infrastructure. Presumably Amazon cares (a lot!) about investors having confidence in the shares, or else nobody, not the shareholders, not the management, not anybody makes money.
I will invest in that. by tekrat · 2014-07-25 01:52 · Score: 5, Insightful

Any company willing to tell it's investors "screw you", because they are looking long-term instead of focusing only on quarterly gains, that's a company I'm willing to invest in.
It's a sad state of affairs in the USA that almost every public company, without question only looks as far as their next quarterly report, and no further down the road. This is why all these businesses are run by idiots that can't even tell you what their company even *does*, because they are so focused on manipulating the stock price and their personal bonuses.
One reason the Japanese kicked our asses in the 1980's is that they were looking at 10-year plans while the USA looked only to the next quarter. Now the Chinese are doing the same, with long-term strategies, and we continue to have not learned our lessons.
So, if Amazon is looking long-term, then they are better managed than 99% of USA businesses. That's a company I can believe in. And I'll invest in that.

--
If telephones are outlawed, then only outlaws will have telephones.
1. Re:I will invest in that. by Anonymous Coward · 2014-07-25 02:07 · Score: 1
  
  I wish you'd screw that useless apostrophe. Look, it's means it is. Not difficult.
2. Re:I will invest in that. by ERJ · 2014-07-25 02:09 · Score: 1
  
  I don't disagree with your premise. Long term strategic planning is something that is very lacking these days. That being said, you can't just say "it will work out" which is kinda what Amazon seems to be doing. Retail is a hard game. Sure Amazon has other things brewing but their bread and butter is retail. Microsoft, Apple, IBM, Google, they can get away with doing heavy R&D and having some bad quarters but in retail you really kinda need to stay at least a bit profitable.
3. Re:I will invest in that. by Anonymous Coward · 2014-07-25 02:16 · Score: 3, Interesting
  
  Considering Amazon has had maybe 5 profitable quarters in 20 years, I'd say they most definitely aren't looking long term. Amazon is a skunk, always has been. People like you are just too fucking stupid to realize it and hand your money over to the clown Bezos.
4. Re:I will invest in that. by LynnwoodRooster · 2014-07-25 02:26 · Score: 1
  
  It's a sad state of affairs in the USA that almost every public company, without question only looks as far as their next quarterly report, and no further down the road. This is why all these businesses are run by idiots that can't even tell you what their company even *does*, because they are so focused on manipulating the stock price and their personal bonuses.
  One reason the Japanese kicked our asses in the 1980's is that they were looking at 10-year plans while the USA looked only to the next quarter. Now the Chinese are doing the same, with long-term strategies, and we continue to have not learned our lessons.
  I don't doubt that long-term strategy is important, but focusing exclusively on that is the sure road to ruin. For example, the Japanese were kicking our asses in the 1980s. How did that turn out? To win at business, you need to maximize your current position without harming your future growth. It's a tough line to walk, but you need both - or you either kill your future for the present, or simply cannot survive to the future.
  
  --
  Browsing at +1 - no ACs, I ignore their posts. So refreshing!
5. Re:I will invest in that. by Sockatume · 2014-07-25 02:31 · Score: 3, Interesting
  
  Twenty years without turning a meaningful profit isn't a clever part of a long-term strategy, it's an entire ongoing business model. Even if Amazon wanted to turn the switch and start making money hand over fist somehow, it would take them decades to transform the kind of business they're in.
  Amazon, as it exists now, will never be a wise investment.
  
  --
  No kidding!!! What do you say at this point?
6. Re:I will invest in that. by Anonymous Coward · 2014-07-25 02:48 · Score: 0
  
  +1.
  Pretty much every single other company is all about how much monies did we make today? And if we didn't make monies today how can we gut the company to make monies tomorrow, and so on until the company is pretty much run into the ground or so "poor" that it just maages to eke for a while(possibly decades) along with no budget for R&D -> dies eventually.
  Politicians are exactly the same, excepting that votes and brib... er campaign contributions.
7. Re:I will invest in that. by bill_mcgonigle · 2014-07-25 02:50 · Score: 2
  
  But amazon has been telling "screw you" to investors ever since it went public in 1998. How long is their long term plan? The only reason investors are tolerating this is because the stock price has gone up as apparently there is no shortage of people who think that huge profits are just around the corner.
  It's not quite that simple - there are profits at Amazon - they are just in certain divisions that are then funding the money-losing divisions.
  Amazon takes a profitable business (remember when they sold BOOKS?) and makes it profitable, but takes those profits to invest in something crazy (like NOT BOOKS, or Kindle, or Prime) and then those divisions get profitable and the cycle repeats.
  If Amazon ever wanted to stop growing as a company it could kill off the non-profitable divisions and show a dividend in short order. This is why the stock has value. Perhaps too much, but the entire market is in a bubble, so it's hard to dice which part of the stock price is which. In some ways stock prices are relative with an absurd floor.
  Investors who have no appetite for such companies can - :gasp: - invest in other companies.
  
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8. Re:I will invest in that. by Salgat · 2014-07-25 03:11 · Score: 1
  
  He used it correctly in other parts of his statement. What likely happened is that he just had a typo and does know the correct meaning.
9. Re:I will invest in that. by Anonymous Coward · 2014-07-25 04:57 · Score: 0
  
  Twenty years without turning a meaningful profit isn't a clever part of a long-term strategy, it's an entire ongoing business model.
  Uh, yea, that's what a long-term strategy is all about. Now, if they were pulling in much revenue or they were spending that revenue on expansion, you'd have a point. But, no, like you say, it's an ongoing business model.
  
  Amazon, as it exists now, will never be a wise investment.
  And that, my boy, is precisely the best kind of investment. You buy low, sell high. You get a piece of Amazon now and in twenty years when they do change into a "start making money hand over fist", they'll be immensely profitable. Waiting for the time the gold rush starts, and you're generally too late and the bottom is already falling out. Because everyone rushes in for the cash grab, prices skyrocket, and then people realize that it's the act of trying to grab a piece that's inflating the price so much. So, there's a mass sell-off.
10. Re:I will invest in that. by Anonymous Coward · 2014-07-25 05:54 · Score: 0
  
  You clearly don't understand how this works, so let me spell it out.
  They are taking a loan, but instead of going to a bank and paying interest, they are using their profits, and then some. Investors are buying in, giving them capital.
  They spend this capital on risky new ventures (like AWS, Kindle, etc...), and produce more profitable parts of the business. These parts will continue to make money year on year, increasing the value of the business (by much more than the amoung people are buying in for).
  If Amazon wanted to, they could stop investing, and just take the return from the new ventures. However, this would cost them more, as they loose out of the future profit from the investments.
  Most people don't buy into companies for steady dividends, because generally that's not the best way to make money. Amazon continuing to do more increases the value of the company by much more than they could possibly pay out to you in profits if they sat back and did nothing.
11. Re:I will invest in that. by Anonymous Coward · 2014-07-25 06:06 · Score: 0
  
  Did you miss the 6400% ROI?
12. Re:I will invest in that. by alexander_686 · 2014-07-25 06:31 · Score: 2
  
  One reason the Japanese kicked our asses in the 1980's is that they were looking at 10-year plans ...
  It is also one of the reasons why Japan has stagnated for the past 15 years. They kept plowing profits back into failing "zombie" companies. Japan would have been much better if they had returned some of their profits to their investors so the investors could invest in the next new shinning thing. Instead the Japanese conglomerates kept everything to themselves. One could argue that South Korea's chaebol are worse.
  The answer, of course, is about balance.
13. Re:I will invest in that. by praxis · 2014-07-25 06:48 · Score: 1
  
  The 6,400% ROI is in the past and is not an indicator of worthiness of investing in Amazon today.
14. Re:I will invest in that. by Anonymous Coward · 2014-07-25 06:54 · Score: 0
  
  They make TONS of money - it just gets re-invested into new ways to makes metric tons of money, and then shit-tons, and then metric shit-tons.
  Sure, they could be like Apple and have more cash on hand than God, but that cash isn't any good unless you are going to do something with it. Amazon is constantly looking for ways to make more money, and in doing so, grows their equity. So buy, and Amazon will do their thing, and then sell in a bit, and ho, Amazon's coffers will look about the same, but the value of the company will have grown and so you sell at a profit.
  Remember, Assets and Equity are on the same side of the equation, and for a reason.
15. Re:I will invest in that. by mattwarden · 2014-07-25 12:21 · Score: 1
  
  > Any company willing to tell it's investors "screw you", because they are looking long-term instead of focusing only on quarterly gains, that's a company I'm willing to invest in.
  They didn't have to tell investors "screw you". Their multiple is ridiculously high. Investors believe the story. This story is about some initial doubt that the long term investments pay off. Forgoing short term gain for long term benefit is a pretty typical thing (it's called CapEx), and investors get worried in times like the last 5 years when companies forgo CapEx in favor of share repurchasing and dividend increases, unless there truly is nothing better for the company to do with their cash.
  Your caricature of "investors" shows a pretty naive view of what analysts and investors do. Of course they are not perfect, but outside of day traders, the kind of long term view that you imply can only be done if companies ignore investors, is very much what money managers, fund managers, analysts, and others look for. All you have left is mom and pop individual investors, who make up such a tiny percentage of the share count that companies don't care about their opinions (nor should they).
Bullshit by sociocapitalist · 2014-07-25 01:55 · Score: 2

These almost certainly aren't real loses, just tax loses. The profits have all just been shifted offshore as the big multinationals do now.

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1. Re:Bullshit by hendrips · 2014-07-25 03:17 · Score: 1
  
  Probably not, actually - this loss is from their global operations, not just their U.S. business. Usually, multinational companies seek to minimize taxes by realizing profit in jurisdictions with low tax rates and costs in jurisdictions with high tax rates, but they usually do not actually under-report profits. CEOs and CFOs don't like jail very much, and tax fraud is one area of the law in the U.S. that's enforced nearly as zealously against the rich and famous as against normal people.
surpising by slashdice · 2014-07-25 01:56 · Score: 5, Interesting

And the farmer cares about his pigs so he doesn't butcher them until they get nice and fat.

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Oblig. xkcd by barlevg · 2014-07-25 01:57 · Score: 1

When I read the summary, I couldn't believe that Amazon had lost over six times its revenue. Then I saw that the revenue was in billions and the net loss was in millions. Fine, $19,000 million dollars looks awkward (despite what Randall Munroe thinks), but there has to be a less confusing way to convey that information.
1. Re:Oblig. xkcd by Lazere · 2014-07-25 02:15 · Score: 1
  
  Could just write the whole number out. "The company brought in over $19,000,000,000 in revenue last quarter, but reported a net loss of $126,000,000. Sure, it looks a bit weird at first, but it does have the bonus effect of giving people a sense of scale.
Amazon as infrastructure by sugar+and+acid · 2014-07-25 02:07 · Score: 1

Amazon is all about market share and building infrastructure to support that market share. So actually the main driver of amazon isn't it's store front/web presence. They sell stuff online, so do thousands of other people out of there garages. What they are driving for in the warehouse/delivery infrastructure to deliver anything, anywhere fast and at the lowest cost. By doing that they can simply offer the same things, faster and cheaper than anyone else.
But that involves building warehouses in strategic locations, and forming deals with delivery companies that lower costs and streamline the process the whole way. At the moment, this extends to delivering to local delivery company and post office depots directly and relying on those delivery services for the last mile delivery.
They have taken that same physical strategic warehouse, tied closely to key last mile delivery infrastructure model into cloud computing. Which is essentially large warehouse of servers, strategically placed for maximum efficiency of running costs and internet connectivity to large markets.
What it means is that they spend all their money that they actually make on razor thing margins, building more infrastructure, to service more customers that they have gotten by out competing everyone on price and delivery speed. All Amazon has to do to turn a profit is to pull back a bit on the growth plans.
The latest foray is into grocerys in some large west coast markets. This is traditionally a direct from store/warehouse last mile delivery service, and offered by a large number of supermarkets etc theses days. What Amazon hope to do isn't to make a lot of money on it, but develop and support a last mile delivery service. Thus completing the vertical integration within amazon of the whole order, pick, pack, ship and delivery process.
1. Re:Amazon as infrastructure by datavirtue · 2014-07-25 04:26 · Score: 1
  
  Even though Amazon has very good prices I find the most value in being a Prime member spending less time tracking down what I need. I don't have to drive...I don't have to find...I don't have to guess. The reviews are right there and the customer service is great. Click, shows up in 1.5 days...and I live in the deep countryside. Anything that removes my dependence on Wal-Mart's shitty retail and grocery management is a great thing.
  
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"the more items Amazon sells to Prime members..." by colfer · 2014-07-25 02:17 · Score: 1

"The more items Amazon sells to Prime members, the more money it loses." What bookshops have been saying for a decade is that Amazon is selling books at a loss, which used to be illegal as anti-competitive monopoly activity.
Much better than the opaque NYT article linked is this December article from IBT: "Amazon: Nearly 20 Years In Business And It Still Doesn't Make Money, But Investors Don't Seem To Care" http://www.ibtimes.com/amazon-... It has the quote above, and the historic profit/loss graph I was looking for. Revenues have risen at a 45 degree angle, but profit/loss hovers around zero.
I will invest in that. by Anonymous Coward · 2014-07-25 02:24 · Score: 1

But amazon has been telling "screw you" to investors ever since it went public in 1998. How long is their long term plan? The only reason investors are tolerating this is because the stock price has gone up as apparently there is no shortage of people who think that huge profits are just around the corner.
23% revenue growth! by timeOday · 2014-07-25 02:27 · Score: 5, Informative

Amazon's revenue grew 23% over the same quarter last year. If the company were not growing AND not profiting, that would be bad. But as large as Amazon's revenues now are, to still be growing that fast is very impressive, and proves they could start taking profits at any moment simply by pocketing more revenue instead of re-investing.
1. Re:23% revenue growth! by Anonymous Coward · 2014-07-25 03:01 · Score: 0
  
  So they lose money but make it up in volume?
2. Re:23% revenue growth! by Typical+Slashdotter · 2014-07-25 04:02 · Score: 2
  
  ...they could start taking profits at any moment simply by pocketing more revenue instead of re-investing.
  Accounting tip: infrastructure investment doesn't show up in a profit and loss statement. It is only relevant for cash flow, and I don't think anyone accuses Amazon of managing cash poorly. Amazon isn't profitable because their sale prices are so close to the costs of the goods they sell. They can't stop any of these losses because they can't sell anything without first buying it from someone else. The only ways for them to increase profitability of their retail business are to raise prices (which they can maybe do) or to cut their costs for each item (which are probably pretty close to as low as possible already).
3. Re:23% revenue growth! by timeOday · 2014-07-25 05:02 · Score: 2
  
  I would like to understand this. The article says that losses for the next quarter are expected to be larger: "Mr. Szkutak listed some of the reasons: Amazon Web Services is in a price-cutting war with Google and others. Six new warehouses have opened. And the company will spend $100 million on new content to put on those phones and Kindles."
  The warehouses, at least, are quintessential infrastructure investment. You are saying Szkutak is incorrect in asserting they cut into short-term profits?
4. Re:23% revenue growth! by jbengt · 2014-07-25 06:18 · Score: 2
  
  Accounting tip: infrastructure investment doesn't show up in a profit and loss statement.
  Actually it does show up there, but it's amortized over several years/decades.
5. Re:23% revenue growth! by snarkh · 2014-07-25 06:34 · Score: 1
  
  This is a strange claim. Building a warehouse or any other infrastructure spending is an expense and will affect the profits, of course.
6. Re:23% revenue growth! by Typical+Slashdotter · 2014-07-25 11:47 · Score: 1
  
  You are correct; investments show up when they are depcreciated over the course of their use. A good investment, however, will generate more revenue than its depreciation expense, so such an investment should not have a net negative effect on any profit and loss statement.
7. Re:23% revenue growth! by Typical+Slashdotter · 2014-07-25 11:57 · Score: 1
  
  Accounting statements are based around three types of accounts: assets, liabilities, and equity. Broadly, assets are things of value the company owns, liabilities are things they owe others, and equity is what's left over, i.e. the net value of the company. The profit and loss statement explains why equity changed in a given time period. Many people confuse this with a cash flow statement, which explains why the amount of cash a company owns changed. When a company makes an investment, they are exchanging cash (a type of asset) for whatever they bought (another asset). Since the equity doesn't change, the purchase itself doesn't show up in a profit and loss statement. It will show up eventually over time, however, as the asset is depreciated: as the investment is used and moves toward the end of its lifespan, it loses value. This loss is a decrease in the value of the asset, and corresponds with a decrease in equity (so it is an expense).
8. Re:23% revenue growth! by Typical+Slashdotter · 2014-07-25 12:06 · Score: 1
  
  I'm not sure why the article claims that opening new warehouses will contribute to operating losses. The price war certainly makes sense, since selling your product for less directly translates to lower profits. My best explanation is to note that what you quote is the writer paraphrasing Mr. Szkutak, rather than a direct quote from Mr. Szkutak. I'd guess that the article writer is slightly confused as to what exactly Mr. Skutak was saying when he mentioned the new warehouses, since he is a tech writer and not a finance writer.
9. Re:23% revenue growth! by dsyu · 2014-07-25 12:36 · Score: 1
  
  This is actually an excellent explanation. Thanks!
Taken in context by Anonymous Coward · 2014-07-25 03:09 · Score: 0

Actually, they are capitalizing on short term losses, by plowing their money into capital improvements. This used to be how companies grew way back before Wall Street started demanding that they "grow" by firing all of the personnel to get a quick bump in profits this quarter so they could dump the stock and let the carcass rot.
No... by Junta · 2014-07-25 03:12 · Score: 1

The investors might have made profit but the company itself is operating in the red. This just means the perceived value is higher than it was in 1998. Which makes sense, we are talking about a company that had 19 billion dollars flow through it in a quarter, which suggests a high likelihood they could be profitable at least for some time if they chose to.
Basically amazon has been saying they are investing and in the very long term the bets will pay off. AS it stands, amazon has not opted to proceed to '3) profit' and are firmly in the '2) ???' phase of their plan.
It remains to be seen how long their investments will pay off should they decide to back off. They have effectively been buying market share and for all the investors know, they have built no 'stickiness' and that share could evaporate the moment amazon decides it needs to be profitable and stops undercutting everyone else who needs to make a profit.

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1. Re:No... by alexander_686 · 2014-07-25 08:44 · Score: 2
  
  Amazon has been booking profits since 2002.
  The issue is that Amazon's return on investments has been low, lower than the S&P 500 as a whole. They have been pursing market share instead of short term profits. They have been investing in new risky business areas. Stockholders currently share Bezos's bullish predictions that short term sacrifice is worth the risky long game. It has worked for Berkshire Hathaway but not so well for Sony. At some point it is going to need to become a more normal company.
Re: barrier to entry by aap · 2014-07-25 03:53 · Score: 1

When you say the "barrier to entry is so absurdly low" you seem to mean that you could start a competing web site yourself for almost no money. And you could... but how will anyone find out you exist, and once they do, how will you convince them to buy from your site? Amazon has buying power, reputation, selection, and cheap fast delivery. They didn't get there overnight, and neither can you.
It's true that the other big names are not taking it lying down. More and more are offering shipping subscriptions, for example. But it's not so easy to convince someone to pay for multiple reduced shipping services from other sites once they have paid for Prime. You're right that there's little risk of actual monopoly though.
Conflicted by HideyoshiJP · 2014-07-25 04:33 · Score: 1

I have to admit that I don't care for the way they treat their employees, but I admire a company that values long-term profits over the short-term. I'm so conflicted now.
Why are they getting into the phone business? by Radical+Moderate · 2014-07-25 04:39 · Score: 1

Just seems like a bad move. Microsoft has been trying and failing to crack that market for a decade, Blackberry's been pushed out. This is not a market crying out for new players.

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1. Re:Why are they getting into the phone business? by 0123456 · 2014-07-25 06:55 · Score: 1
  
  They're getting into the phone business for the same reason Apple did; to tie phone users to their app/video/ebook/music stores.
  I haven't looked in detail, but I presume the phone is using their version of Android, like the Kindle?
2. Re:Why are they getting into the phone business? by captjc · 2014-07-25 11:09 · Score: 1
  
  I wouldn't call Amazon a "New Player" in the phone market. The Kindle Fire is still an Android tablet and has been selling like hot cakes. They also have had 4G connectivity for a few years. The Kindle phone is just a smaller version of their tablet that can make phone calls. Other than the smaller form factor and phone app, nearly everything else is the same.
  
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In other words by ThatsNotPudding · 2014-07-25 05:06 · Score: 1

The cost of Prime will be going up. Again.
Didn't cost Amazon a dime by sjbe · 2014-07-25 06:54 · Score: 1

In contrast, the skittish investors yesterday cost the company about $12B compared to the $126M business loss. The skittish investors who cause huge overnight drops like this create opportunities.
Skittish investors didn't cost the company a penny. You will not find the stock price in any profit or loss statement for the company. The day to day fluctuations of the stock market have only a very indirect effect on Amazon's finances. The main thing it matters for is if Amazon were to issue additional stock to the market in the future, they wouldn't raise as much money. It also has a mild effect on their cost of capital.
What this means is that skittish investors cost all Amazon investors $12B in value over a $126M loss for the current period. Probably a bit of an over reaction as you pointed out. The profit or loss here is frankly immaterial. What matters is what investors think of Amazon's prospects going forward. Personally I think Amazon is in a very strong position and they could be profitable tomorrow if they felt the need. I see it as a buying opportunity if anything.
Amazon isn't out of expansion area by Animats · 2014-07-25 06:55 · Score: 1

Amazon isn't out of expansion area. Their target is all of retail, and there's still a lot of non-Amazon retail. Most other big US companies with lots of cash have hit their natural limits.
Trying to go beyond those limits is tough. Google has not been successful in expanding beyond ads. (Android only makes money as an ad platform; Google's phone revenue is small.) Apple has a lot of cash, but can't find any way to use it that will yield the kind of margins Apple is used to. Facebook is still growing, but again, it's all ads.
There's only so much ad spending in the world, and the ad-based companies are all fighting over the same pot. There's more room to grow when your business model is "sell everything".
1% is big in retail by sjbe · 2014-07-25 07:06 · Score: 1

Let's imagine Amazon runs a script and raises all their prices, every single one of them, by 1% Would anyone notice?
Short answer? Yes they would.
Long answer? 1% is not a trivial price increase when what you are selling is commodities at cutthroat retail prices. Walmart's entire profit margin is just a hair over 3% and nobody thinks they are a failure. Their cost advantage over competitors like Target is whisper thin. Less than 1%. If they raise prices by just 1% they would no longer be the cost leader anymore.

Is 1% even enough to justify looking elsewhere for a product?
On individual items? Mostly not. But over a large enough basket of items and customers? Absolutely yes. They would without question lose some amount of business.
18,000% growth in stock value since 97 by vpness · 2014-07-25 09:19 · Score: 1

yes, eighteen thousand. Compare that to the dow, nasdaq and even the much maligned msft. Wow, I sure wish I'd put 1K or 10K into amaz stock and held. Sure, amaz is off its peak of 20,000 % profit recently, but ... so maybe amaz, and the longer term investors really, really do know what they're doing. For example, the amaz phone? my family members are looking at buying just for the mayday feature. Unlike probably most /. folks, mayday, for the 'rest of them,' is such an amazing feature.
Re:surprising by eric_harris_76 · 2014-07-26 05:04 · Score: 1

And by "any other monopoly does" we mean Amazon will discover it's easier to get market dominance than keep it.
If they suddenly get all scary big-pricey, they'll discover that people can buy from elsewhere -- and their suppliers will discover that selling a lot with razor-thin margins is not nearly as good as selling less with much better margins.
Other happy-ending scenarios outlined here: http://www.daviddfriedman.com/...
Well, unless they engage in violence, or get the government to do it on their behalf. The latter possibility is a credible one worth considering.

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Re: barrier to entry by LordLimecat · 2014-07-26 18:11 · Score: 1

And you could... but how will anyone find out you exist, and once they do, how will you convince them to buy from your site?

Google adwords, google checkout. Or Yahoo stores, if you prefer.
The problems youre proposing dont exist. And for the record, amazons prices tend to be higher, because they build the shipping cost into the item cost.