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Amazon's Profit Plunges 73%

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Re: Amazon's Profit Plunges 73%

#81

Post by gujk »

megablast wrote: post #9
mikeryan wrote: post #5

Profit'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...

On the other hand, revenues can mean nothing as well, since profits are what count, and huge revenues do not always translate, and could be a sign of a spending problem.

It can be hard to tease out from the fancy accounting, but marginal profit (that is presumably sustainable) should be distinguished from new investment (which can be stopped if needed) and not just added together to get a profit number.

That said, the buck should eventually stop at Free Cash Flow to prove shareholder value, which is then paid as dividend or invested sensibly.

Re: Amazon's Profit Plunges 73%

#82

Post by gujk »

gruseom wrote: post #68
srdev wrote: post #51

Earlier quoted context omitted.

As with most big companies, whether its a caustic environment or not really depends on which team you're working for. The culture instilled by your manager or manager's manager is more powerful than the corporate culture as a whole.

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.

Re: Amazon's Profit Plunges 73%

#83

Post by gujk »

firefoxman1 wrote: post #59
chugger wrote: post #35

Earlier quoted context omitted.

How about the $50 Amazon is losing per Kindle Fire sold?

Yeah, how about losing money on every book sold back when they started? It seemed to work for them.

Amazon has never said no to paying a dollar of fixed overhead to generate $1.01 in lifetime marginal profit. Amazon is also willing to write down the first 5 years of a product's life as overhead. That is JeffB's genius (along with the ability to get the accounting right on these razor thin margins).

Re: Amazon's Profit Plunges 73%

#84

Post by gujk »

rbranson wrote: post #19
tomkarlo wrote: post #16

Earlier quoted context omitted.

Given that no kindles fires have shipped, they haven't booked any revenue or costs for them yet, either.

I'm pretty sure their vendors would disagree.

You may be surprised. Amazon is expert at "ship now, pay vendors later". In many areas, Amazon maintains a negative layover from when they pay vendors to when customers pay Amazon.

Re: Amazon's Profit Plunges 73%

#85

Post by eliasmacpherson »

bostonpete wrote: post #22
secretasiandan wrote: post #10

Earlier quoted context omitted.

That's not an article, that's a press release. Source is Business Wire https://en.wikipedia.org/wiki/Business_Wire "Business Wire is a company that disseminates full-text news releases from thousands of companies and organizations worldwide to news media, financial markets, disclosure systems, investors, information web sites, databases and other audiences" Does the press have an incentive to talk about the plunge in…

I don't think you needed to provide that link/quote. It's got "PRESS RELEASE" printed right there at the top of the article.

saves me from clicking the link.

Re: Amazon's Profit Plunges 73%

#86

Post by gujk »

secretasiandan wrote: post #10
mikeryan wrote: post #5

Profit'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...

That's not an article, that's a press release. Source is Business Wire https://en.wikipedia.org/wiki/Business_Wire "Business Wire is a company that disseminates full-text news releases from thousands of companies and organizations worldwide to news media, financial markets, disclosure systems, investors, information web sites, databases and other audiences" Does the press have an incentive to talk about the plunge in…

It is a document released to the press by Amazon, but it isn't an ad, it is a copy/summary of their official earnings report, plus some ignorable color.

Re: Amazon's Profit Plunges 73%

#87

Post by gujk »

kijin wrote: post #43

> Amazon also said it ended the third quarter with 51,300 employees, up from 31,200 in the same quarter last year. Amazon creates 20,000 jobs, and Wall Street responds with a 12% drop in stock price.

You should look at what Wall St did to Amazon's stock price on the 364 days previous to today.

Re: Amazon's Profit Plunges 73%

#88

Post by gujk »

polymatter wrote: post #67
dkokelley wrote: post #31

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…

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?

Re: Amazon's Profit Plunges 73%

#89

Post by eitland »

gujk wrote: post #79
ceejayoz wrote: post #47

Earlier 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?

Apps is a special case were they make a nice profit from both selling apps that they haven't created and selling devices that run said apps.

Re: Amazon's Profit Plunges 73%

#90

Post by grandinj »

gujk wrote: post #82
gruseom wrote: post #68

Earlier 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.

You just said it - senior managmenent creates a culture for middle management, and that culture creates the culture for the techies. If it's corrosive at the top, it tends to end up corrosive at the bottom.
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