Showing 128 posts tagged amazon
It seems pretty clear that Amazon is optimising its cashflow to zero: pushing it as low as it is possible to go and still run the business. This is rather like Tim Cook at Apple managing inventory to zero: Amazon manages cashflow and profits to zero.
It’s such a fascinating play.
Mark Gimein for Bloomberg:
Comparing Bezos’s fortune to Amazon’s earnings highlights how deeply puzzling that increase has been. Since 2003, the first year in which Amazon earned a profit, through the end of 2011, Amazon has reported a total of $5 billion in earnings. Amazon has not yet reported results for this year; it lost money in the last quarter, but is expected to turn a profit for the year.
Think of it this way: if Bezos had started the company himself, still owned all of it, and had taken out every penny in profit, his bank balance would be less than one-quarter of what his shares are worth. Or think of it another way: Apple’s profit for the last quarter alone is well over twice Amazon’s profit over its entire entire existence.
It’s crazy, but Amazon appears to be “gaming” Wall Street by not being extremely profitable. There really is nowhere to go but up. The sky is still the limit. As opposed to Apple, which has earned more money in the past year than any company ever save one: Exxon. If the sky is the limit, they’re almost in outer space.
Eugene Wei on a key facet of Amazon’s business that few people think about:
Almost all customers paid by credit card, so Amazon would receive payment in a day. But they didn’t pay the average distributor or publisher for 90 days for books they purchased. This gave Amazon a magical financial quality called a negative operating cycle. With every book sale, Amazon got cash it could hang on to for up weeks on end (in practice it wasn’t actually 89 days of float since Amazon did purchase some high velocity selling books ahead of time). The more Amazon grew, the more cash it banked. Amazon was turning its inventory 30, 40 times a year, whereas companies like Barnes and Noble were sweating to turn their inventory twice a year. Most people just look at a company’s margins and judge the quality of the business model based on that, but the cash flow characteristics of the business can make one company a far more valuable company than another with the exact same operating margin. Amazon could have had a margin of zero and still made money.
Amazon continues to fascinate me because increasingly, they’re playing the same game as Apple (meaning in the same markets: music, movies, books, tablets, phones, etc). But they play the game in the opposite way — and it still works.
[via Warren Colbert]
Sarah Perez of TechCruch:
Amazon is today introducing a new service called Amazon AutoRip, which automatically gives customers free MP3 versions of any CDs they’ve purchased from Amazon since the launch of its Music Store back in 1998.
It’s a good idea by Amazon since they have that type of sales data going way back. But all it really reminds me is that I haven’t bought a CD in seven years and counting.
Mike Shatzkin, the founder and chief executive of Idea Logical, on Barnes & Noble’s most recent quarter.
I have fond memories of going to Barnes & Noble as a kid; I fear that’s all they’ll be soon: memories.
Also, what’s up with this part of the story by Leslie Kaufman of The New York Times:
Other companies do not break out sales of their digital tablets, but Amazon has been saying sales of its Kindle Fire were strong. Analysts say Apple’s iPads also appear to be doing well.
The Justice Department suing Apple and the major publishers was supposed to be a huge win for consumers as eBook prices were going to plunge to the levels Amazon wanted. Except that hasn’t happened.
Why? David Streitfeld of The New York Times argues that it may be due to the fact that we’ve now passed the peak of the eReader market and the prices for both those devices and tablets are plunging, making the eBook margin actually matter somewhat to Amazon.
Whomp! (There it is.)
Alexei Oreskovic and Alistair Barr for Reuters:
Research firm Forrester reported that 30 percent of U.S. online shoppers in the third quarter began researching their purchase on Amazon.com, compared with 13 percent who started on a search engine such as Google - a reversal from two years earlier when search engines were more popular starting points.
Search ads work so well thanks to purchasing intent. Retail shopping isn’t the only game, but it’s an important one. This isn’t good news for Google.
I agree with the larger analysis here. Whereas the past couple of years have been all about “Apple vs. Google”, I think that shifts to be more about “Amazon vs. Google” in 2013. The two increasingly have more overlap when it comes to each of their key businesses.
Tomorrow’s cover today: concern about the clout of the internet giants is growing. But antitrust watchdogs should tread carefully.
Update: As a few folks have noted, perhaps the most interesting thing about the graphic is the company not included: Microsoft. Ouch.