To restate the obvious, this is a case of reinvesting in the company's future growth. Net profits (distributable to shareholders) are diminished when a company reinvests, so yes, "profits" are down. However, a more meaningful metric is net sales - cost of goods sold. Amazon had to make a choice of what to do with their meaningful profits (what's sold - what it cost to create, sell, and support it). They could give it to shareholders, reinvest it in future growth, hand out bonuses, or burn it. All of those activities (except dividends) will lower their net profit on the income statement. The market is a fickle beast. Amazon will do fine, but given the company's history, I pity those who bet against it.
Amazon's Profit Plunges 73%
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Re: Amazon's Profit Plunges 73%
#32God, investors are idiotic. Amazon spends money to upgrade its infrastructure, stock price plunges 12 percent . Rational!
They should do more for less, like magically store all 8 billion items they have in stock in the back of my car or something. Warehouses housing wares. How extravagant. Where's the innovation.
(And to answer my sarcastic comment, the innovation is "order from your suppliers and have them ship directly to the customer, then you don't need warehouses". But the reason people pay Amazon's prices is because the item shows up at their house the same day they buy it, which means that 1990s mail-order model doesn't work anymore. Investors shouldn't be allowed to invest until they've purchased at least one product from Amazon.)
Re: Amazon's Profit Plunges 73%
#33I wonder if analysts have learned yet not to dismiss apparently crazy moves by Jeff Bezos.
For years I though Bezos was crazy and that Amazon could never, ever repay all the billions it had raised/spent. I was so, so wrong... I wouldn't bet against Bezos.
Re: Amazon's Profit Plunges 73%
#34Their Q4 earnings don't matter because they are transitioning to a much different business model... quarter-to-quarter analysts don't take that into account.
Re: Amazon's Profit Plunges 73%
#35I wonder if analysts have learned yet not to dismiss apparently crazy moves by Jeff Bezos.
Crazy moves like "heavy spending on warehouses, data centers and digital-content offerings" An online store buying stock and building infrastructure !!!!! Crazy , they should be borrowing money and paying themselves bonuses before going bust - that's what Wall St wants
How about the $50 Amazon is losing per Kindle Fire sold?
Re: Amazon's Profit Plunges 73%
#36God, investors are idiotic. Amazon spends money to upgrade its infrastructure, stock price plunges 12 percent . Rational!
They should do more for less, like magically store all 8 billion items they have in stock in the back of my car or something. Warehouses housing wares. How extravagant. Where's the innovation. (And to answer my sarcastic comment, the innovation is "order from your suppliers and have them ship directly to the customer, then you don't need warehouses". But the reason people pay Amazon's prices is because the item shows…
> Investors shouldn't be allowed to invest until they've purchased at least one product from Amazon.
Seriously. My wife gets Amazon Prime for free through school. Within the first month I was looking for the best opportunity to buy stock. The service is quite literally amazing, and handing it out free to students is just damn genius. That's just one small thing on top of all the other things they do really well at.
Re: Amazon's Profit Plunges 73%
#37Profit's are such a volatile metric. Amazon's been spending like crazy in the last few months on producing new Kindle products - most of which are being sold as a loss leader in an effort to push book sales. Note that Amazon's overall Revenues are up 44% Less sensational, more nuts and bolts article http://www.marketwatch.com/story/amazoncom-announces-third-q...
AFAIK there is no substantial evidence that the Kindle Fire is being sold as a loss leader however I can imagine the profit margins are slim.
They're losing $50 per kindle fire.
Re: Amazon's Profit Plunges 73%
#38To restate the obvious, this is a case of reinvesting in the company's future growth. Net profits (distributable to shareholders) are diminished when a company reinvests, so yes, "profits" are down. However, a more meaningful metric is net sales - cost of goods sold. Amazon had to make a choice of what to do with their meaningful profits (what's sold - what it cost to create, sell, and support it). They could give it…
I think the most important metric is return on equity. Profit is not really a consideration on Wall Street.
Re: Amazon's Profit Plunges 73%
#39Earlier quoted context omitted.
Crazy moves like "heavy spending on warehouses, data centers and digital-content offerings" An online store buying stock and building infrastructure !!!!! Crazy , they should be borrowing money and paying themselves bonuses before going bust - that's what Wall St wants
How about the $50 Amazon is losing per Kindle Fire sold?
Has that been confirmed? I've heard anywhere from $5 to $50, and its always been from analysists trying to estimate the cost from parts. As far as I know, the only people who really know how much the Kindle costs to make are Amazon.
Re: Amazon's Profit Plunges 73%
#40Earlier quoted context omitted.
Crazy moves like "heavy spending on warehouses, data centers and digital-content offerings" An online store buying stock and building infrastructure !!!!! Crazy , they should be borrowing money and paying themselves bonuses before going bust - that's what Wall St wants
How about the $50 Amazon is losing per Kindle Fire sold?
It is a tried and tested method for selling technology. Look at the history of the Sony Playstation. Sell the hardware at a loss and make double your money back from software and content.