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Amazon's Profits Are Floating On a Cloud (Computing)
HughPickens.com writes: The NY Times reports that Amazon unveiled the financial performance of its powerful growth engine for the first time on Thursday, and the numbers looked good, energized primarily by renting processing power to start-ups and, increasingly, established businesses. Amazon said in its first-quarter earnings report that its cloud division, Amazon Web Services, had revenue of $1.57 billion during the first three months of the year. Even though the company often reports losses, the cloud business is generating substantial profits. The company said its operating income from AWS was $265 million.
Amazon helped popularize the field starting in 2006 and largely had commercial cloud computing to itself for years, an enormous advantage in an industry where rivals usually watch one another closely. At the moment, there is no contest: Amazon is dominant and might even be extending its lead. Microsoft ranks a distant No. 2 in cloud computing but hopes to pick up the slack with infrastructure-related services it sells through Azure, the name of its cloud service. Amazon executives have said they expect AWS to eventually rival the company's other businesses in size. The cloud business has been growing at about 40 percent a year, more than twice the rate of the overall company and many Wall Street analysts have been hoping for a spinoff.
As for Google, the cloud was barely mentioned in Google's earnings call. Nor did the search giant offer any cloud numbers, making it impossible to gauge how well it is doing. But the enthusiasm of Eric Schmidt, Google's executive chairman, was manifest when he spoke at an event for cloud software developers this week. "The entire world will be defined by smartphones, Android or Apple, a very fast network, and cloud computing," said Schmidt. "The space is very large, very vast, and no one is covering all of it."
Amazon helped popularize the field starting in 2006 and largely had commercial cloud computing to itself for years, an enormous advantage in an industry where rivals usually watch one another closely. At the moment, there is no contest: Amazon is dominant and might even be extending its lead. Microsoft ranks a distant No. 2 in cloud computing but hopes to pick up the slack with infrastructure-related services it sells through Azure, the name of its cloud service. Amazon executives have said they expect AWS to eventually rival the company's other businesses in size. The cloud business has been growing at about 40 percent a year, more than twice the rate of the overall company and many Wall Street analysts have been hoping for a spinoff.
As for Google, the cloud was barely mentioned in Google's earnings call. Nor did the search giant offer any cloud numbers, making it impossible to gauge how well it is doing. But the enthusiasm of Eric Schmidt, Google's executive chairman, was manifest when he spoke at an event for cloud software developers this week. "The entire world will be defined by smartphones, Android or Apple, a very fast network, and cloud computing," said Schmidt. "The space is very large, very vast, and no one is covering all of it."
of enterprise computing .. Prehaps open stack or derivatives will be the default platform.
What is probably the saddest is Microsoft. Their two biggest cash cows (Windows and Office) are under tremendous pressure. And they really have trouble innovating in ways that are replacing that income. They chase everybody else, late to the game: mp3 players, search, cloud services, online email, smartphones, etc. Their constant focus on Windows over the Ballmer years really blinded them to all else that was an opportunity in the computing world. And so companies like Amazon, Apple, and Google are there instead.
I'm a Google Fanboy so when I wanted to set up a cloud server for a webapp I went straight to Cloud Compute. I had been burned by AWS phantom charges in the hundreds of dollars that could not be identified from their management console. Starcluster based OpenMPI "hello world" experiment turned $500 CC expense.
Anyway, right as I'm getting settled in to Cloud Compute(very happy with their tutorial on setting up mongoDB etc.) I'm building my web app and Cloud Compute suspends my account for terms of use violation out of the blue. No explanation. Just got flagged by heuristic analysis based on CC country vs. IP address continent probably(on vacation).
Whatever reason they flagged the account, I went through a nightmare ~1 week trying to get my account unfrozen. I eventually gave up and started a new AWS account which is now billing me $30/month for a Windows Server 2008 "Workspaces" instance I NEVER use. Moral: Google TOU "Kangaroo Courts" and shit customer support in appeals lost them my business, so I have a hard time crying for my favorite company on this front.
If they can't handle their shit with someone who WANTS to give them money I have no sympathy.
Isn't AWS used for more than cloud storage and computing? It's also used for simple web hosting. Did they subtract the revenue from website hosting from that $1.5B figure.
What's the difference between cloud storage + computing and "web hosting"? AWS just provides the platform.
A bigger machine in a far away place always had the cost advantages of the economy of scale. Everytime there is a jump in connection speeds and bandwidth some customers found it cheaper to "out source" computing to a remote machine. But eventually the advantages of local storage and local computation adds up. So let us see how long this iteration lasts.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Given that Microsoft seems to be investing heavily in Azure, I'd wonder exactly how they plan to beat AWS. AWS had some new machine learning algorithm added a month ago; Azure doesn't have that. Either way, however, is a win. If Microsoft's making some fatal mistake with their new business model, then maybe they'd go bankrupt and help the industry by going open-source before death. If Azure stays where it is or ranks up in usage with its SaaS model, then there'll probably be some interesting competition between them two and Google with large user bases. Either way, there's competition, which will (almost) forever spiral downward prices and upward capabilities.
Seems like this should really be IBM's forte. I wonder why they didn't jump into it with both feet.
-jcr
Cheap commodity services was never IBM's forte - they don't want to rent you a $20 virtual server that you maintain yourself, they want to sell you a million dollar mainframe and $10,000 Intel servers that you pay IBM to maintain.
When you hear a company bragging about Operating Income, pro-forma earnings, EBITA, etc. instead of GAAP results you should assume they're blowing smoke. Those numbers are easily cooked and leave out too much.
Which is why the stock is valuable. No one is paying the current price because Amazon is making a lot of profit but because in the future they might be the only one left standing to make any profit. They've essentially said that their game is drag a razor across everyone's throat and bet on their skin being the thickest.
It will be interesting to see at what point the government goes after them for predatory market practices if they're only sustainable because of massive revenue/profit from other divisions.
The summary appears incorrect. The linked article says that MS has annualized revenue of $6.3 billion from "cloud" business.
Google's $1.57 billion translates to an annual number of $6.28 billion from Amazon Web Services.
I'm not sure how either company defines what is included in those numbers.
Does anyone have better information or metrics?
BlameBillCosby.com
They've been trying(in part by developing, in part by buying, they ate Softlayer and Cloudant fairly recently); but they've been finding it a bit tricky.
IBM wants to sell you some sort of unique, value-added, hardware and/or software feature that makes going with them worth it over going with the commodity product(presumably, this is why they sold of PCs and low-end servers). Some customers do want this; but it's a very, very, different offering from the more commodified cloud providers(Amazon, Google, and Microsoft all differ a bit in where they are on the spectrum from 'what you do with them is your problem; but our VMs are cheaper than you can believe' to 'we can provide automagic email accounts and SQL server instances abstracted from the host OS'; but all of them are very much on the 'we aren't going to hold your hand; but look at how cheap this stuff is' side, an area where IBM has no obvious advantages.)
Web hosting companies will take a steep penalty to you for using too much CPU or memory. And usually ask you for your money in advance.
The only difference between a web hosting company and Amazon is the billing model?
In addition to EC2, there are lots of other services that are encompassed under AWS that compliment EC2 nicely - RDS is their service for standing up easy database instances that take care of most of the configuration headache associated with the big relational databases out there (pgsql, mysql, mssql, oracle). Route53 is a scriptable DNS service. CloudFormation gives you tools to automate standing up entire application stacks including DNS records, load balancers, application servers spread across availability zones for redundancy, etc. OpsWorks gives you a Chef-esque service for managing software deployments. IAM roles allow you to grant servers access to other AWS services without having to deal with certificates / passwords / keys in an atomic fashion. There are numerous other services that I'm not even using right now, but exist as replacements for things we've already wired up in EC2 previously to Amazon announcing them.
It's a hell of a package that makes things like Microsoft Azure look like a joke in comparison, and is cost competitive with building out your own datacenter as long as you use it properly, and think about what you're doing a little - make sure you back your shit up out of AWS so that you always have an "off-site" copy, for example. And if you use something like Chef / OpsWorks, you can recover from a disaster practically anywhere if you have your cookbooks, source code, and data backed up.
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
And they absolutely don't make up for it when someone pays their Prime membership and only orders 4 things a year.
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
Incorrect. http://azure.microsoft.com/en-us/services/machine-learning/