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

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.

Comments

surpising

[LduN]

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).

Re:surpising

[segedunum]

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.

Re:surpising

[MozeeToby]

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

Re: surpising

[Frobnicator]

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!

Avoiding Amazon Web Services?

[FearTheDonut]

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?

Re:Avoiding Amazon Web Services?

[mlts]

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.

surpising

[slashdice]

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

Re:I will invest in that.

[Anonymous Coward]

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.

Re:I will invest in that.

[Sockatume]

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.