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Why is Amazon all of a sudden not re-investing all its profits?

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Re: Why is Amazon all of a sudden not re-investing all its profits?

#11

Post by ravivyas »

mcherm wrote: post #9

Summary: Because they're "proving" they can make a profit when they want to in preparation for spending a decade investing 100% of profits into building a world-wide logistics system. (I think it's an interesting theory, but the author provided little evidence.)

I don't think any company will wait a few quarters to invest in something. And if they did that and win, well, they have invented a time machine.

Re: Why is Amazon all of a sudden not re-investing all its profits?

#12

Post by deegles »

fweespee_ch wrote: post #4

http://www.nytimes.com/2014/04/26/business/amazons-shrinking... I think a couple years ago they got tired of their stock tanking every time they reported a lower profit than previous quarters.

Employee compensation is heavily tied to stock, especially at the higher levels. You might be right!

Re: Why is Amazon all of a sudden not re-investing all its profits?

#14

Post by golergka »

clavalle wrote: post #6

Because that was the plan all along? At some point Amazon is going to get a return for all of its investment. The entire market is now dancing to Amazon's tune. Why not now?

Because they have an incredible opportunity to grow further right now.

Re: Why is Amazon all of a sudden not re-investing all its profits?

#15

Post by simonebrunozzi »

mcherm wrote: post #9

Summary: Because they're "proving" they can make a profit when they want to in preparation for spending a decade investing 100% of profits into building a world-wide logistics system. (I think it's an interesting theory, but the author provided little evidence.)

It's no secret news. Rumors about this has been around for several years.

Re: Why is Amazon all of a sudden not re-investing all its profits?

#16

Post by koluft »

fweespee_ch wrote: post #4

http://www.nytimes.com/2014/04/26/business/amazons-shrinking... I think a couple years ago they got tired of their stock tanking every time they reported a lower profit than previous quarters.

What are they going to doing they can't sustain these profits in future quarters?

Re: Why is Amazon all of a sudden not re-investing all its profits?

#17

Post by justinhj »

fweespee_ch wrote: post #4

http://www.nytimes.com/2014/04/26/business/amazons-shrinking... I think a couple years ago they got tired of their stock tanking every time they reported a lower profit than previous quarters.

Wonder if they wouldn't be better off going private again

Re: Why is Amazon all of a sudden not re-investing all its profits?

#19

Post by ChuckMcM »

Frankly I'm surprised this hasn't happened sooner. So much money is sloshing through Amazon these days, keeping it balanced to the point where you don't let it accumulate (generating profit) or flow to fast (generating loss) has got to be scary complex. At every large company I've worked at there are things on the balance sheet that are "tunable" by management which helps with this. It was a running joke inside Network Appliance that we always beat expectations by $.01 cent per share. Of course until you didn't and that usually meant that what ever mechanisms you used for tuning your cash flow didn't have enough dynamic range to cover the change that quarter.

Amazon then, being a services, merchandising, payment processor conglomeration then has to be crazy hard to manage cashflow in any meaningful way.

Re: Why is Amazon all of a sudden not re-investing all its profits?

#20

Post by mabbo »

golergka wrote: post #13

Do they really need to show that the switch is working? Shouldn't it be obvious from their financials?

People got spooked. The stock tumbled. Time to flip the switch back to 'profit' for a quarter or two, then once everyone understands that the switch exists, put it back to 'invest' where it belongs.
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