If your stock drops 12% when your profits drop 73% you're doing just fine.
Anybody that thinks differently should short this stock. We'll talk in 24 months ;)
Amazon's Profit Plunges 73%
101–110 of 111 posts
Re: Amazon's Profit Plunges 73%
#102Earlier quoted context omitted.
It wasn't enough. They may have been selling at a loss, but the introductory PS3 prices were at least twice as much as the Wii. When Sony began to cut prices, sales jumped. A $100 price cut in 2009 doubled sales: http://kotaku.com/5356885/npd-ps3-sales-gain-ground-on-price...
If I also remember correctly, the Wii was the first modern console (post NES, I assume) that sold at a profit, which was a measly $6. http://www.joystiq.com/2008/12/01/forbes-nintendo-making-6-p...
As far as I remember, Nintendo always did that, selling each console at profit, however small that may be, starting from NES, to Super NES, N64, Gamecube and now Wii (and I guess, soon WiiU).
So Nintendo was the only manufacturer who did not apply the "razorblade" model of the other console makers, which is understandable since they were and are a videogame company only and thus never had any other branches which could have been able to subsidize their console business in the beginning (unlike for example Microsoft).
I think the first console Nintendo made that actually sold at a loss is the current 3DS handheld and that may be after the very fast initial price cut after the slow reception on the market.
Re: Amazon's Profit Plunges 73%
#103Earlier quoted context omitted.
This number is meaningless(and probably wrong) if you don't know the extra profits it would generate, and what's at stake here. Some estimates(read:guesses) think that 50% of kindle users will subscribe to to amazon prime. Prime users are extremely loyal to amazon, do all their online shopping in amazon and use brick and mortar shops much less than before signing with prime.They tend to buy 3x-4x than before, in amaz…
That 50% number seems high to me. Seems chicken-and-egg. Do they buy a Kindle then subscribe to Amazon Prime or do they use Amazon a lot and thus get both a Kindle and Amazon Prime? And like most chicken-and-egg questions, the answer is both and neither. As someone who has spent far too much time puttering around brick-and-mortar stores recently, before walking away in disgust and just buying it on Amazon, I can't he…
When you buy a kindle fire , you get prime free for 30 days. after that, you need to subscribe.
Yes, the 50% is high, but people who tried prime are really , really happy with it, so maybe 50% makes sense.
And yes, it's definitely cars vs horses.
Re: Amazon's Profit Plunges 73%
#104I 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
Back in the day, "heavy spending on warehouses, data centers, and digital content offerings" would be labeled what it is: plowback.
The company is reinvesting some of its earnings back into the business, rather than using those profits simply to reward shareholders. It's a long-term move, and Wall Street analysts these days seem wholly incapable of thinking further out than a quarter or two.
Re: Amazon's Profit Plunges 73%
#105Earlier quoted context omitted.
A tried and true strategy. That has worked for (in no particular order) : ATM's, Printers, Razors, Mobile Phones, Gaming Platforms and probably even cars in some cases. If Sony had cottoned onto this strategy, Beta would have been the worldwide video standard and they would have been paid back massively in royalties. Shifting hardware at a loss to lock in consumers is the oldest trick in the book. Nowhere is it more…
Its a tried and true strategy if there wasnt a better strategy. Amazon doesnt need to create their own hardware. They are doing just fine selling Ebooks via their iPad and android apps. Low overhead, more profit. Selling their own hardware does not provide any value add to the customers, all it does it reduce their margins and profit. People already buy ebooks via their apps. People are talking like this is a good mo…
You obviously don't have a Kindle. I would never try and read an ebook on an iPad after having a Kindle. It is chalk and cheese.
Once you setup your account on your Kindle, it is 1-click purchasing to get yourself a new book.
Sure, you might shop around for an ebook, but most people aren't going to. They'll just search on the Kindle, click the 'yes I want it' button, and you're finished. Total platform lock-in. Tech people might get sniffy but to the average person it's like going from vinyl to iPod.
There are two Kindles in this household. Since their arrival, the yearly book spend has probably tripled. Previously most reading was re-reading older books and taking trips to book exchanges.
All this is possible with other platforms, yes, but the Kindle is just the physical part of an entire delivery system. The margins on ebooks has to be better than print by an order of magnitude, even though the price is lower.
Re: Amazon's Profit Plunges 73%
#106Earlier quoted context omitted.
Apple doesn't use a similar model, they use the exact opposite model. They sell content at minimal profit to enhance the ecosystem for their devices, which they make a very tidy profit on.
Maybe for music, but is that still true for the App Store?
It's still pretty true for the App Store. Apple hit the $2B paid out to developers mark early this year, IIRC, which means about $1B of revenue for Apple for the entirety of the App Store's existence. Their latest quarter saw nearly $30B revenue, so it's still a pretty tiny part of their business.
Re: Amazon's Profit Plunges 73%
#107Earlier quoted context omitted.
How about the $50 Amazon is losing per Kindle Fire sold?
Apple, if you're listening, I've got an idea! First, you need to prove beyond any doubt that the Fire is being sold at a loss. Once you know this, set up some dummy stores and invest the billions of dollars you have laying around in buying as many as you can. Once you have them, put them all in a compactor. Make sure each one is destroyed without anyone having laid a finger on it. See how long Amazon can sell these t…
Apple's cash-on-hand is nearly as much as Amazon's total market cap. If they wanted to take out Amazon, there are much easier ways.
Re: Amazon's Profit Plunges 73%
#108Earlier quoted context omitted.
more powerful than the corporate culture as a whole My experience has been the opposite, that a deviant subculture can't survive for long and is eventually rejected by the host.
You really think JeffB is walking around interviewing thousands of individual contributors and line managers, and firing the ones who are nice to each other? Senior management creates a culture for middle management. Middle management decides how to transmute that into the lower management community.
If "culture" means anything, it refers to something self-sustaining. Initial conditions, which come from the founders, have a large influence. So do the values and behavior of leaders. Any development which is too deviant within an organization is eventually rejected the way an immune system rejects a foreign body. Culture is the agent in that process. That the rejection is executed by middle managers doesn't mean that they invented the culture any more than I personally manage my antibodies.
Re: Amazon's Profit Plunges 73%
#109Earlier quoted context omitted.
Spending on day-to-day expenses is termed revenue expenditure. This shows up in the income statement and affects profits. Spending on future investment is termed capital expenditure. This is not shown on the income statement and does not affect profits. (It's on the balance sheet instead) Eg. Buying a new warehouse does not decrease profits (but it will of course affect your cash). Blue-sky R&D is also recorded as an…
But depreciation is an expense, yes? So Amazon gets to average their investments for a 7-year rolling window or whatever, not postpone them indefinitely. Unless there is a way to claim that the software/IP has some resale value remotely approaching its cost to build?
true, depreciation is an expense but one that accountants can fiddle with. I am only a trainee accountant and UK accounts are different from US accounts in ways I am not familiar, so don't take this as legal advice or anything.
For start though, the deprecation policy itself can be changed. So as long as there is a note in the accounts giving some justification, I can say "I am not depreciating these assets". This is a crude way to manipulate depreciation and generally any competent auditor would flag it.
Buying a new warehouse for example you generally wouldn't depreciate at all (usually holding it at cost and revaluing it every so often). So apportion all costs relating to buying the warehouse (including cost of machinery in the warehouse, connecting it to your IT network, legal and admin work) as a one line item Fixed Asset: Warehouse, and you just avoided all depreciation. (It will still be shown on the accounts, but doesn't touch the income statement.)
Or you can decide to put it as a 5-year rolling investment as you put it and you're charging 20% depreciation.
Or you can decide that this investment is not a one-off thing and is part of the core business (perhaps you're buying warehouses all the time). So then you can charge the whole lost as an expense.
I suppose my point (back to the topic) is that Amazon's profits have gone down largely because of how Amazon's accountants have decided the best way of presenting their investment costs in their accounts. It makes sense to reduce book profits as that reduces your taxes. (Generally true, though I know in UK corporation tax calculations we don't take into account depreciation for the very reason that its manipulatable). A profit dive is especially fine if you have continued impressive revenue growth to point to and can claim that these investments are clearly worth it. Nobody is going to claim that Amazon is in serious trouble.
Re: Amazon's Profit Plunges 73%
#110Isn't the plunge in stocks due to the fact that the Kindle Fire has a very low profit margin? I don't think this article is correct with what the cause-and-effect is.