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Why Amazon Is Special and Apple Is Not

theatlantic.com

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Re: Why Amazon Is Special and Apple Is Not

#51

Post by prof_hobart »

I'm not sure if I'm missing something screamingly obvious here, but the article seems to me to be ignoring some rather critical facts.

People have been beating Apple on price for years, yet Apple are still here and still reaping their profits. These are not commodity products - I doubt that too many people would choose a Samsung tablet over an Apple one based solely on the fact that they were £100 cheaper. If I want an iPhone or an iPad, I'm only going to be buying it from Apple

Amazon, on the other hand, offer pretty much nothing that couldn't be copied or beaten by a big retailer (someone like WalMart, or Tesco in the UK) if they really put their mind to it.

Re: Why Amazon Is Special and Apple Is Not

#52

Post by alpeb »

Drawing conclusions of a company's performance given a stock price change is a classical mistake. The share price change only says if the announced figures were in accordance to the market's expectations and has nothing to do with the level of those figures. If amazon's stock went up is because the market expected its profits were gonna be worse than they actually were. It doesn't mean the market thinks amazon is awesome.

Re: Why Amazon Is Special and Apple Is Not

#53

Post by gfodor »

michalu wrote: post #45

What this article basically says is that Apple is not special because it is likely to become (in case of price wars) Amazon. But I don't get what makes Amazon so special to be valued at P/E 3000 while Apple a company with enough capital on books to buy 100% of Amazon stock in cash is valued at P/E 10. Possibly a stupidity and self deception of investors. ( On another hand I totally admire Jeff Bezos and the company h…

Wow, I never made the connection but you are right. If AAPL really wanted to, they could buy AMZN in cash right now, even with their absurd valuation. Nuts.

Re: Why Amazon Is Special and Apple Is Not

#54

Post by gfodor »

saosebastiao wrote: post #37

Since when does P/E matter for any company that is not paying dividends? If you buy a company's stock knowing that they aren't paying dividends, then you are obviously paying for growth.

You have a point but only if you replace "paying dividends" with "returning capital to investors."

Re: Why Amazon Is Special and Apple Is Not

#55

Post by gfodor »

guard-of-terra wrote: post #34

That's why I always struggled with the concepts of dividends. If you have so much money you can pay dividends, it means you have grossly high margins and not investing in growth enough; which means someone will come and not only destroy your margins but your business also. If we're talking tech not mining.

The primary duty of the company's executives is to deploy capital effectively. Paying out dividends in many cases is a sign of good management since it makes it clear they understand the limitations of what they can do with deploying capital internally. The assumption is that unless they can earn more on the capital than shareholders could by investing it elsewhere, they should return it to shareholders.

Re: Why Amazon Is Special and Apple Is Not

#56

Post by pvdm »

codeflo wrote: post #12

Article claims that it's easy to compete with Apple, yet hard to compete with Amazon. Fair enough, makes a lot of sense to me. And yet, last I checked, a lot of companies made serious money in retail, but very few companies managed to earn substantial profits in smartphones, tablets and notebooks. I seems to be harder to compete with Apple than most investors think it is. (I say that as a developer who hopes that an…

It is tough to compete in the public relation and marketing arena. It is a soft-skill that many competitors have not master.

Re: Why Amazon Is Special and Apple Is Not

#57

Post by jseliger »

codex wrote: post #50

Apple is special because it is the paragon of the tech. innovator. There is always some new big thing in technology, and while Apple may not remain king, there will always be a company like Apple doing amazing things. Amazon, on the other hand, is in retail. Very little magic or innovation happens in this old business, though Amazon is doing its best to squeeze some from a stone. Their music business was successfully…

>Amazon, on the other hand, is in retail. Very little magic or innovation happens in this old business

This isn't really true. Check out Emek Basker's famous paper "The Causes and Consequences of Wal-Mart's Growth" (econ.missouri.edu/working-papers/2006/wp0611_​basker.pdf (and its citations)) and the work of other economists who estimate that WalMart, on its own may be responsible for an appreciable portion of U.S. productivity growth in the 90s and 2000s.

One major problem India suffers from right now is entrenched incumbents who prevent modern retail practices from reaching most of the country. A lot of people there would love for American-style retail practices to spread.

Re: Why Amazon Is Special and Apple Is Not

#58

Post by rednukleus »

arrrg wrote: post #21
rednukleus wrote: post #13

Earlier quoted context omitted.

Apple have Most of their profit comes from phones and tablets, and in both of these markets their global marketshare has decreased, or at best held steady, in most quarters over the last few years.

… but in an overall growing market. It’s not necessarily true that competitors are converting owners of Apple devices en masse, it’s much more likely that competitors are able to convert more non-smartphone or tablet users than Apple can. I foresee Apple being just a company that doesn’t grow much in the future but still makes tons of money.

They may well be able to hold on to a niche segment in the market with high margins, but the chances of them holding on to a dominant position and high margins are slim to none. This is the reason for their seemingly low P/E.

Re: Why Amazon Is Special and Apple Is Not

#59

Post by fspeech »

simonh wrote: post #14

And yet 5 years after the launch of the iPhone Apple still hoovers up a vast proportion of the profits in both the mobile industry and the desktop computer industry. Meanwhile 17 years after it launched, Amazon earned in total as much as Apple does in a single quarter. The point is that Apple's devices are not easily disrupted by low end competitors because building software platforms and ecosystems is incredibly har…

You are right about the ecosystem but that is not how Apple makes so much money. iPod and app/music sales are minor portions of Apple valuation. The main profit center is driven by high iPhone margins, which are carrier subsidized so that people upgrade without second thought. When there are good enough lower cost alternatives carriers have all the incentive to reduce the subsidy, which either show up as lower gross margin for Apple or higher prices for consumers (which leads to less upgrades and less unit volume). Pick your poison.

Re: Why Amazon Is Special and Apple Is Not

#60

Post by acchow »

SonicSoul wrote: post #32
simonh wrote: post #14

And yet 5 years after the launch of the iPhone Apple still hoovers up a vast proportion of the profits in both the mobile industry and the desktop computer industry. Meanwhile 17 years after it launched, Amazon earned in total as much as Apple does in a single quarter. The point is that Apple's devices are not easily disrupted by low end competitors because building software platforms and ecosystems is incredibly har…

wow! you're right comparing the net income of Apple to Amazon.. in 2012 the difference was astounding at 98,000 vs 41,733,000! http://finance.yahoo.com/q/is?s=AMZN http://finance.yahoo.com/q/is?s=AAPL+Income+Statement&an...

In case people are wondering, the unit is '000 USD.

So that's 98 million vs. 41 billion USD.

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