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Amazon earnings miss Street estimates, Kindle sales nearly triple - Page 2

post #41 of 132
Quote:
Originally Posted by Red Oak View Post

The investments in physical plants/warehouses is a CAPEX expense (cash flow) and does not hit the income statement. Only depreciation impacts earnings. And, Amazon is going to have A LOT of depreciation hitting its books in the near future

Stock buybacks also do not hit the income statement. They are a use of cash funds and hit Cash Flows (under Investing Activities)

Last, $.38 per share per quarter would generate a 130 PE ratio over the course of a year @ the current $195 stock price (an expansion of the 102 they are at today). A PE of 130 vs. Apple's PE of 13

Amazon has to become 10X more profitable just to justify their current market cap. Yeah, good luck with that

But PE doesn't work that way. It uses EPS over the last four quarters, which is a big difference for a cyclical company like Amazon. And I wonder if you were saying the same thing about AAPL when that stock's PE was over 100.

And market cap never needs to be "justified." It is what ever the market says it is.
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post #42 of 132
Quote:
Originally Posted by AppleGreen View Post

I think they are hiding Kindle sales because they are not selling as many as the estimates that are out there. This article mentioned an estimate of 6 million Kindle Fire sales. At $200 each, that is $1.2 billion. The ereader Kindles I would estimate at 1 million at $100 each on average would add another $100 million in revenue. So, a total of $1.3 billion in Kindle revenue.

Total revenue was $17.43 billion. So, 7.5% of total revenue was Kindle sales? I find that hard to believe. Amazon sells lots of other stuff.

If my numbers are off, then feel free to provide your estimates.

I think that's way off.

Start with what we know. Amazon said that they were selling 1 M Kindles OF ALL TYPES per week during the weeks before Christmas. That means that in the 6 weeks after the Kindle Fire launch, they sold about 6 M Kindles.

How many were Fires? There's no direct evidence, but we can speculate based on their Kindle growth rate. They claimed that total Kindle sales were up 177% last quarter (that is, 2011 sales were 277% of 2010 sales). Let's take the two extremes;

1. Assume that the older Kindle sales were unchanged. That is, ALL of the increased sales were from the Fire. That would mean that 64% of the total Kindle sales were Fire (177/277) and 36% were DX, etc. That would put Kindle Fire sales at 3.8 M (64% of 6 M).

2. We know that iPad sales were up 111% from the previous year last quarter. If Amazon's existing product sales were up by the sam 111%, then Kindle Fire sales were 66% of last year's figures. At this extreme, Fire was 24% of the total (66/277) or 1.4 M units.

So we can put the Kindle Fire unit sales somewhere between 1.4 and 3.8 M units. I predicted last week that the number would be between 2 and 3 M - and that's pretty reasonable given the few facts that we know. Call it 2.5 M at $200, so total revenues for the Fire were about $500 M. At the extremes, total Fire revenues were between $280 M and $760 M. And that's not counting returns if they were significant after Christmas.



Now, let's talk about losses. Estimates for losses have ranged from $5 to $10 per unit all the way up to $50 per unit on materials only. If materials losses were $50, total loss per device (including labor, overhead, quality cost, etc) would have been at least $75. Using the above estimate of 2.5 M units sold, that's $12.5 M losses at the low end up to $175 M on the high end. Compare that to their net income of $177 M. Without losses from the Fire, their net income would have been between 5% and 100% higher than it was. I really don't see any way to narrow it down further than that with the available evidence.
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post #43 of 132
Quote:
Originally Posted by Dr Millmoss View Post


And market cap never needs to be "justified."

That has to be the strangest bit of financial 'wisdom' I've heard in a long while.
post #44 of 132
Traveled quite a bit since Christmas. Noticed a lot more kindles than before. However, don't recall seeing a fire yet.
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post #45 of 132
Oh, gosh

When Amazon makes a phone, they're going to call it the Flint, aren't they?

No, they'll make two phones, the Flint being the high end and the Tinder being the low end. Both with 4.5" screens

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post #46 of 132
Quote:
Originally Posted by anantksundaram View Post

Some of us predicted this (and take no joy in it).

This is just getting started. They'll probably have to pull or scale back Fire at some point.

hi folks

I hope they find a way to fix things - with or without the fire. Amazon is still my favorite place to buy things online and I would hate to see a merketplace without their pricing pressure.
post #47 of 132
Quote:
Originally Posted by snova View Post

Dont confuse revenue with profit.

Care to explain your math? Do you know what Apple's profit was in the most recent quarter?
post #48 of 132
Quote:
Originally Posted by Steven N. View Post

As a fork, when you do a product search, the Fire does not use Google but goes through Amazon's search catalog first. You can get everything from RAM chips, resistors, monitors, books, generators and cars through Amazon. This does two things:

1) It substantially lowers Amazon's bill they get from Google every month.

2) It targets more sales of all retail items to Amazon and their affiliates.

Amazon doesn't get any monthly bills from Google.
Advertisers pay Google directly for views and clickthroughs.

Thompson
post #49 of 132
Quote:
Originally Posted by MonkeyBoy View Post

hi folks

I hope they find a way to fix things - with or without the fire. Amazon is still my favorite place to buy things online and I would hate to see a merketplace without their pricing pressure.

Amazon (the company) will do just fine and serve your needs for a very long time. AMZN (the stock) has some serious correction to do.

Thompson
post #50 of 132
Quote:
Originally Posted by snova View Post

Dont confuse revenue with profit. If you turn the statement into a profit comparison then lets compare low long it would take Apple to lose as much money as Amazon lost last quarter?

He didn't. Apple's profit for the quarter was $13 B - or about $140 M per day.

Amazon's profit for the quarter was $177 M.

For revenues, the ratio is obviously different - it took Apple about a month to have as much revenue as Amazon did for the entire quarter. But given the huge differences in their business, that's not a very useful comparison.
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post #51 of 132
Quote:
Originally Posted by thompr View Post

Amazon doesn't get any monthly bills from Google.
Advertisers pay Google directly for views and clickthroughs.

Thompson

Amazon is a major advertiser on Google. There are lots of queries that result in an Amazon ad at the top of the Google search results. That cannot be cheap.
post #52 of 132
Ignoring their lackluster profits completely I'm amazed that Amazon's Kindle category is only up 177% YoY. That's all their eReaders with a new touchscreen version and new lower priced for the entry level model AND their media tablet. That's just pathetic when you've added so much to that oddly grouped category. For comparison the iPad was up 111% YoY and it had been out 6-9 months so it wasn't a new product added to the product category like with the Kindle Fire.

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post #53 of 132
Quote:
Originally Posted by Mac Voyer View Post

The point is not whether they make money. It is that they are roughly, vaguely, somehow ANDROID! Android tablets are now, what, 40% of the market? The BS talking point is all that matters to some.

Except that the Fire is not an Android tablet. Although, now, I don't think there is a market for Android tablets.
post #54 of 132
Quote:
Originally Posted by Orlando View Post

Amazon is a major advertiser on Google. They are lots of queries that result in an Amazon ad at the top of the Google search results. That cannot be cheap.

True that... good point.

Thompson
post #55 of 132
Quote:
Originally Posted by anantksundaram View Post

This is just getting started. They'll probably have to pull or scale back Fire at some point.

Why? They aim is to clearly build a very large userbase. It is standard MO for Amazon. Quickly and aggressively expand into new markets. Amazon frequently takes a loss on a new market inorder to attract customers.

The more people with Fires the more people who will be using Amazon for buying books, movies, music and apps. This helps to lock people into Amazon resulting in even more purchases over the long term. Furthermore, these people are then more likely to buy other goods on Amazon. Personally I wouldn't be surprised if they release a kindle phone and set top box in order to further lock consumers into Amazon services.

Their business model is different from Apple. Apple's end goal is to sell more hardware. Amazon want to sell you anything you could possibly want to buy.
post #56 of 132
Quote:
Originally Posted by jragosta View Post

I think that's way off.

Start with what we know. Amazon said that they were selling 1 M Kindles OF ALL TYPES per week during the weeks before Christmas. That means that in the 6 weeks after the Kindle Fire launch, they sold about 6 M Kindles.

How many were Fires? There's no direct evidence, but we can speculate based on their Kindle growth rate. They claimed that total Kindle sales were up 177% last quarter (that is, 2011 sales were 277% of 2010 sales). Let's take the two extremes;

1. Assume that the older Kindle sales were unchanged. That is, ALL of the increased sales were from the Fire. That would mean that 64% of the total Kindle sales were Fire (177/277) and 36% were DX, etc. That would put Kindle Fire sales at 3.8 M (64% of 6 M).

2. We know that iPad sales were up 111% from the previous year last quarter. If Amazon's existing product sales were up by the sam 111%, then Kindle Fire sales were 66% of last year's figures. At this extreme, Fire was 24% of the total (66/277) or 1.4 M units.

So we can put the Kindle Fire unit sales somewhere between 1.4 and 3.8 M units. I predicted last week that the number would be between 2 and 3 M - and that's pretty reasonable given the few facts that we know. Call it 2.5 M at $200, so total revenues for the Fire were about $500 M. At the extremes, total Fire revenues were between $280 M and $760 M. And that's not counting returns if they were significant after Christmas.



Now, let's talk about losses. Estimates for losses have ranged from $5 to $10 per unit all the way up to $50 per unit on materials only. If materials losses were $50, total loss per device (including labor, overhead, quality cost, etc) would have been at least $75. Using the above estimate of 2.5 M units sold, that's $12.5 M losses at the low end up to $175 M on the high end. Compare that to their net income of $177 M. Without losses from the Fire, their net income would have been between 5% and 100% higher than it was. I really don't see any way to narrow it down further than that with the available evidence.

Really good analysis. The bottom line though is that $50MM in losses compared to what it did in advertising value and raising brand awareness during the holiday shopping season tends to make me think that this was a beautiful execution strategy on Amazon's part. Kindle Fire really isn't even a blip on the radar in practical terms.
post #57 of 132
Quote:
Originally Posted by jragosta View Post

I think that's way off.

Start with what we know. Amazon said that they were selling 1 M Kindles OF ALL TYPES per week during the weeks before Christmas. That means that in the 6 weeks after the Kindle Fire launch, they sold about 6 M Kindles.

How many were Fires? There's no direct evidence, but we can speculate based on their Kindle growth rate. They claimed that total Kindle sales were up 177% last quarter (that is, 2011 sales were 277% of 2010 sales). Let's take the two extremes;

1. Assume that the older Kindle sales were unchanged. That is, ALL of the increased sales were from the Fire. That would mean that 64% of the total Kindle sales were Fire (177/277) and 36% were DX, etc. That would put Kindle Fire sales at 3.8 M (64% of 6 M).

2. We know that iPad sales were up 111% from the previous year last quarter. If Amazon's existing product sales were up by the sam 111%, then Kindle Fire sales were 66% of last year's figures. At this extreme, Fire was 24% of the total (66/277) or 1.4 M units.

So we can put the Kindle Fire unit sales somewhere between 1.4 and 3.8 M units. I predicted last week that the number would be between 2 and 3 M - and that's pretty reasonable given the few facts that we know. Call it 2.5 M at $200, so total revenues for the Fire were about $500 M. At the extremes, total Fire revenues were between $280 M and $760 M. And that's not counting returns if they were significant after Christmas.



Now, let's talk about losses. Estimates for losses have ranged from $5 to $10 per unit all the way up to $50 per unit on materials only. If materials losses were $50, total loss per device (including labor, overhead, quality cost, etc) would have been at least $75. Using the above estimate of 2.5 M units sold, that's $12.5 M losses at the low end up to $175 M on the high end. Compare that to their net income of $177 M. Without losses from the Fire, their net income would have been between 5% and 100% higher than it was. I really don't see any way to narrow it down further than that with the available evidence.

That's a very reasonable breakdown... Without actual numbers it makes more sense than anything I've seen.
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post #58 of 132
Quote:
Originally Posted by Red Oak View Post

The investments in physical plants/warehouses is a CAPEX expense (cash flow) and does not hit the income statement. Only depreciation impacts earnings. And, Amazon is going to have A LOT of depreciation hitting its books in the near future

Stock buybacks also do not hit the income statement. They are a use of cash funds and hit Cash Flows (under Investing Activities)

Last, $.38 per share per quarter would generate a 130 PE ratio over the course of a year @ the current $195 stock price (an expansion of the 102 they are at today). A PE of 130 vs. Apple's PE of 13

Amazon has to become 10X more profitable just to justify their current market cap. Yeah, good luck with that

thanks for explaining some accounting 101 to kresh.
post #59 of 132
Quote:
Originally Posted by kresh View Post

This was hardly a miss. Amazon managed a $0.38 per share earnings, crushing the street's estimste of $0.17.

Wow. Talk about putting lipstick on a pig! A year ago, Amaazon's eatnings were 91 cents a share. And you're BRAGGING about the fact that, a year later, they earned two-fifths of that? "Crushing street estimates"? Since when has the street had the ability to make decent estimates? And which particular "street" person are we talking about? The bag lady on the corner?
post #60 of 132
Quote:
Originally Posted by Dr Millmoss View Post

But PE doesn't work that way. It uses EPS over the last four quarters, which is a big difference for a cyclical company like Amazon. And I wonder if you were saying the same thing about AAPL when that stock's PE was over 100.

And market cap never needs to be "justified." It is what ever the market says it is.

I understand PE is based four quarters of results. I was projecting on an annualized basis

I would argue that the Holiday Q4 should have been Amazon's shining quarter - their highest profits. Like any other retailer. If anything, the PE has a lot of downside to the 130 above as revenues come down in future quarters to reflect seasonality

I agree - ultimately a company's worth and market cap is simply what investors are willing to pay. Amazon has done a very good job convincing investors of their plan. I simply do not believe this mirage is going to last much longer

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post #61 of 132
Quote:
Originally Posted by island hermit View Post

Actually, this shows that Apple now has real competition and will soon be in second place for tablet sales. By this time next year Samsung and Amazon will be selling 3 tablets for every one that Apple sells.

</slappy>

How do you know. Amazon has never said how many they sold. Any numbers you've read anywhere are MADE UP [see the definition of "estimate"]. Even the title of this article [Kindle sales nearly triple] is comparing last years estimates with this years.
post #62 of 132
These terrible results from Amazon come as no surprise to anybody who is knowledgeable.

So, they sold an undisclosed amount of Kindles to a few whiny people who can't afford an iPad? And
for each one they sell, they're losing money?

And no, the Kindle Fire sales model can't be compared to the game console model of the past, as games are pretty pricey for the consoles, and if people are primarily buying the Kindle Fire because it's cheap, then these people will definitely not be buying a lot in extra content for their precious low end tablet. It seems as if Amazon will have a hard time making any significant profit with their strategy.
post #63 of 132
Quote:
Originally Posted by anonymouse View Post

Except that the Fire is not an Android tablet. Although, now, I don't think there is a market for Android tablets.

Actually, the published numbers which show Android to have 40% or so of the market seem to include Kindles. There's no way that the numbers could be right if Kindle is NOT included.

Quote:
Originally Posted by aaarrrgggh View Post

Really good analysis. The bottom line though is that $50MM in losses compared to what it did in advertising value and raising brand awareness during the holiday shopping season tends to make me think that this was a beautiful execution strategy on Amazon's part. Kindle Fire really isn't even a blip on the radar in practical terms.

That all depends. First, you have to figure what else you could have done with that money. And not just the $50 M (or whatever it was) loss, but the hundreds of millions that was tied up in pass-through business. So if the above numbers are correct, Amazon had to spend $550 M - and got $50 M back. That's a big amount of cash to have tied up with no benefit.

Second, you have to consider the alternatives. What if they had spent the $50 M on advertising? or offering the first 600,000 callers free Amazon Prime? Or any of the other things they could have done with the money.

Without hard numbers (in particular numbers on how much it affected their image and customer retention), it's really impossible to say. My gut tells me that there are a lot of very unhappy people in the Kindle group today.
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post #64 of 132
Quote:
Originally Posted by Orlando View Post

Their business model is different from Apple. Apple's end goal is to sell more hardware.

You bet its business model is different.

You forgot to complete the second sentence above: "..... at a profit."
post #65 of 132
Quote:
Originally Posted by jragosta View Post

Actually, the published numbers which show Android to have 40% or so of the market seem to include Kindles. There's no way that the numbers could be right if Kindle is NOT included

I think that was his point. The Android analyst crowd desperately wants bigger numbers to shill their stock churns, and the only way to get those are to include the padded Fire estimates, despite the fact Fire isn't really an Android tablet.

While I have not seen one I have no reason to disagree that a Fire would make a very good e-reader. But that isn't the same thing as a fully functional and flexible mobile-computing tablet.

It becomes a very interesting juxtaposition when you consider how hard many analysts are trying to keep iPads from being considered mobile computers that can be counted in PC sales like netbooks. Continuing that convoluted logic, why shouldn't iPod Touches be considered small form factor tablets inflating iOS tablet shipment numbers?

The lack of sanity and self serving analyst motivations used to date when categorizing product comparisons is basically out of control and the tech/financial press enable them.
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post #66 of 132
Quote:
Originally Posted by Hiro View Post

I think that was his point. The Android analyst crowd desperately wants bigger numbers to shill their stock churns, and the only way to get those are to include the padded Fire estimates, despite the fact Fire isn't really an Android tablet.

While I have not seen one I have no reason to disagree that a Fire would make a very good e-reader. But that isn't the same thing as a fully functional and flexible mobile-computing tablet.

It becomes a very interesting juxtaposition when you consider how hard many analysts are trying to keep iPads from being considered mobile computers that can be counted in PC sales like netbooks. Continuing that convoluted logic, why shouldn't iPod Touches be considered small form factor tablets inflating iOS tablet shipment numbers?

The lack of sanity and self serving analyst motivations used to date when categorizing product comparisons is basically out of control and the tech/financial press enable them.

We're leaving the era of personal computers and entering the era of individual computers... All the old rules are moot... Just like 1978!
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post #67 of 132
Quote:
Originally Posted by MacQuest View Post

See Amazon?

Selling many pieces of cheap junk = windows pc's/samsung phones/pretty much all android devices in general such as your Kindle Fizzle... fo' shizzle.

The cherry on top is missing Wall Street estimates.

You do know that Amazon sells a lot of Apple products too, right? Apple products generally top the charts of their respective categories on Amazon.

Quote:
Originally Posted by Dr Millmoss View Post

But PE doesn't work that way. It uses EPS over the last four quarters, which is a big difference for a cyclical company like Amazon. And I wonder if you were saying the same thing about AAPL when that stock's PE was over 100.

And market cap never needs to be "justified." It is what ever the market says it is.

Market value is what it is, but in an allegedly rational market, there should be a somewhat rational reason for prices being where they are. If the fundamentals don't add up, then it's worth asking hard questions, because sometimes there is some irrational exuberance afoot.

Quote:
Originally Posted by anonymouse View Post

Except that the Fire is not an Android tablet. Although, now, I don't think there is a market for Android tablets.

It's bastardized Android, but still Android.
post #68 of 132
Quote:
Originally Posted by anantksundaram View Post

That has to be the strangest bit of financial 'wisdom' I've heard in a long while.

Really? Care to elaborate? Before you answer you might stop to think about whether my statement had anything to do with finance.
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post #69 of 132
Quote:
Originally Posted by thompr View Post

Amazon doesn't get any monthly bills from Google.
Advertisers pay Google directly for views and clickthroughs.

Thompson

Are they billed "monthly"? Perhaps not (it might be weekly or even daily) but given Amazon transfers between 4 and 5 million USD to Google every month for advertising, my guess is this is invoiced in some periodic nature and not on a "per click" basis.

The point still stands. By the Fire bypassing Google search for many product searches, Amazon avoids paying the click-through advertisements to Google. If Amazon can get a significant number of the frequent shoppers using the Fire to shop, they can save a significant amount of money they are paying for search based ads.
post #70 of 132
Quote:
Originally Posted by Red Oak View Post

I understand PE is based four quarters of results. I was projecting on an annualized basis

I would argue that the Holiday Q4 should have been Amazon's shining quarter - their highest profits. Like any other retailer. If anything, the PE has a lot of downside to the 130 above as revenues come down in future quarters to reflect seasonality

I agree - ultimately a company's worth and market cap is simply what investors are willing to pay. Amazon has done a very good job convincing investors of their plan. I simply do not believe this mirage is going to last much longer

But then, if you'd made the same bet a few years ago when AAPL was selling at a similar earnings multiple it would have been the wrong bet. Investors are willing to pay what seem, at the time, like outrageous premiums for growth stories. If the earnings don't follow then the stock price will deflate, eventually. I'm not putting any of my markers on AMZN but as someone who has held AAPL for nearly 15 years I can understand why someone might.
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post #71 of 132
Quote:
Originally Posted by Dr Millmoss View Post

But PE doesn't work that way. It uses EPS over the last four quarters, which is a big difference for a cyclical company like Amazon. And I wonder if you were saying the same thing about AAPL when that stock's PE was over 100.

And market cap never needs to be "justified." It is what ever the market says it is.

That is the most... ah... interesting advice yet.

Likewise, you have the PE wrong. You are talking about the trailing PE and not the PE.
post #72 of 132
The Fire/Amazon model has a much better chance of being profitable than Android in general, but it still suffers from the same fundamental problem that is becoming more and more apparent here in the USA. I give them credit for at least tightly integrating the shopping and purchasing process. And considering that most people buying these tablets and smartphones really don't know how to do that much on them, that's a very good thing.

Most people buy iPhones and iPads because these iOS devices are really easy to operate. There's not much of a learning curve at all. The App Store is front and center on the device and incredibly easy to figure out and thus start spending money on apps.

Most people buy/acquire Android-based smartphones and tablets because they're cheaper or free. But how many of those people can so easily figure out how to spend money on them? Everyone I know with an iPhone sits and talks about apps that they bought in the App Store no matter how tech savvy they may be, while most of the people with Android phones end up shrugging in confusion when they try to find something comparable on their phones. They end up using their smartphone to occasionally browse the web, check Facebook, send texts, get directions, oh, and to make calls.

Most people I know with Android phones have simply given up on apps. In the last year, I've noticed more and more people in my social settings with iPhones (largely thanks to the iPhone being available on Verizon and Sprint) and as they tap into the world of apps on the iPhone, the remaining Android users seem to be growing more and more frustrated and complacent. It's as if they consider themselves "second class citizens" but just don't want to think about it. There's always the IT nerds who love Windows who can find their way around, but that's a small minority of Android owners realistically. The rest don't seem to want to know about apps because they don't know how to find them on their own smartphone. It's the same for Blackberry users, and it really all boils down to the integrated, incredibly well-stocked App Store. (And for the record, even the tech-savvy Android phone users I know have or want iPads.)

The other issue is of course the fact that the many people buying Android devices or the Fire because it's cheap are the people least likely to want to spend money on apps and services even if they figure out how to buy them. Again, many of these people are slowly realizing that spending money might be worth their while, but when they decide to do so, that's when they buy the iPhone and iPad.

As much as the competition is seemingly "growing" in terms of shipments and people acquiring cheap/free devices, I'd say more than ever the iPhone and iPad are set up for ever-increasing long-term success. For awhile you could make an excuse for not having an iPhone because they were expensive or not available on your carrier, and at first you could just call the iPad and iTampon and laugh with a few people. Also, more and more Android phones came out that looked a lot like an iPhone and had "better" specs and all that, so people have had those too for awhile now. But then the iPhone landed on 3 of the 4 major carriers officially, got a lot cheaper (even free on AT&T) and now just about everyone has actually used an iPad.

So now, despite all the competitive options, the cheaper options, the better specs, the bigger screens, the smaller screens, the BOGO offers, the LTE, whatever...the iPhone and iPad still are considered the best smartphone and tablet by the vast majority of people. For most of the people I talk to who don't have iPhones or iPads, it's gotten to the point where it's become a matter of "when" they'll get an iPhone and iPad. With the iPhone, it's almost always "next upgrade" and with the iPad, it's when they a) can scrounge up the money, b) simply break down and buy it or c) when their laptop gets too annoying or breaks. Even the biggest Android nerds I know are starting to break.

So when Apple says all this competition is good, especially in tablets, I absolutely believe them. I really think the current iPhone and iPad sales numbers will look weak compared to what they'll do in the next 2-3 years. The storm has been brewing since 2007, but the full force of it hasn't even come close to hitting yet. iPhone on most carriers in the U.S., the iPad being adopted in enterprise and education and, well, just China in general; these three things are going to produce numbers that will blow peoples minds in the next 2-3 years.

Apple said it best in the iPad 2 commercials: they're just getting started.
post #73 of 132
They have no choice but to take these losses. A lot of what they sell is quickly becoming digital, and to depend on 3rd parties (e.g. Apple, Samsung) to provide the sole delivery platforms is not acceptable from a business strategic point of view.
post #74 of 132
Whatever there is to say about the Fire and its market share today (half-baked and over-hyped), there should be no doubt that Amazon will be coming out with new, improved models this year and in the future. At some point the Fire will be quite good and still very inexpensive. there will likely be a 10" model too. it's bound to be popular.

but today's financial report makes it clear that won't be good enough to carry Amazon forward strategically.

what is hard to predict is whether the Fire will remain basically an Amazon shopping applicance, with a limited Amazon ecosystem focused on that as now (Amazon Kindle and Prime, etc.), or expand into more of a general purpose device. and will Amazon try to set up its own "social" services to further compete with Google, or partner with an existing player (Facebook would be ideal for them, but Yahoo would be more likely)?

i definitely expect Facebook to enter the tablet market too later this year or next with its own inexpensive brand (they could buy RIM with new stock, no cash, and get the QNX OS), obviously focused on its social services, but expanding into what? Facebook and Google (with its Motorola hardware and, btw, whatever happened to Chromebooks?) are mortal enemies now, that's clear. and Amazon could turn that war into triangular combat, three of them trying to out manuver each other with loss-leader hardware and monetized services of all kinds. and they might all bleed profits badly in the process.

but while they are cutting each other to pieces, Apple will continue on a different ecosystem model. iTunes, iLife, iCloud, and maybe iWork (enterprise)/iBooks (education) are the core of the Apple ecosystem and all its integrated hardware. what Apple defninitely does not do itself is "social," instead mainly supporting the others' services.

the rest of the Android OEM's products? they'll just be commodity cheap stuff, mainly feeding the telcos' needs for service contract sales. Sony, LG and Samsung will try to get their own hardware-based ecosystems going, but consumers outside Japan/Korea won't care because they have nothing like Apple's software to go with it. and Microsoft/Nokia? well, they missed the train.

i don't see how this all turns out good for Amazon. huge volume sales, but little or no profit, and always at risk. dump your stock.
post #75 of 132
Quote:
Originally Posted by anantksundaram View Post

You bet its business model is different.

You forgot to complete the second sentence above: "..... at a profit."

By your logic Apple's business model is presumably doomed since they operate the iTunesStore at break even rather than trying to make a profit. You don't need to make a profit on every individual item you sell. Look up loss leader.

BTW Amazon has previous said that Kindle owners purchase much more from Amazon than the average customer.
post #76 of 132
Quote:
Originally Posted by jragosta View Post

Actually, the published numbers which show Android to have 40% or so of the market seem to include Kindles. There's no way that the numbers could be right if Kindle is NOT included.

Actually Kindle Fire uses a modified version of Android. However, it is modified to break the shackles of Google. Yes, with all those hype surrounding Android being "Open", Google have a very tight leash around it. For example, you need a certificate from Google to use the Android Market in your phone/tablet. What Amazon did is they replaced the Android Market with their own Amazon Store. I guess only Amazon have the means and infrustructure to do that. What can HTC, Samsung, Motorola do without Android market?

Read here how Amazon shows Google the door.

http://www.theverge.com/2011/9/28/24...-androids-lock
post #77 of 132
Bezos is losing $50 per unit and tripling his volume? Is he going to hock his spaceport to fund that madness?

   Apple develops an improved programming language.  Google copied Java.  Everything you need to know, right there.

 

    AT&T believes their LTE coverage is adequate

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   Apple develops an improved programming language.  Google copied Java.  Everything you need to know, right there.

 

    AT&T believes their LTE coverage is adequate

Reply
post #78 of 132
Quote:
Originally Posted by kresh View Post

Why? The Kindle Fire is not what compressed margins this quarter. Amazon's margins have been suppressed for the past few quarters due to the huge spending on physical warehouse construction, cloud infrastructure build-out, video on demand build-out, and feature discounts. Amazon continued this trend with $500 billion USD in infrastructure expenditures.

What came out of the blue was Amazon's buy back of 1.6 million shares of stock at over $600 million USD. It has been a while since they bought back stock. Net income would have been over $750 million USD instead of the $177 million USD without the buyback.

I am glad to see the investments to improve their physical and financial positions.

This was hardly a miss. Amazon managed a $0.38 per share earnings, crushing the street's estimste of $0.17.


In sharp distinction to Apple--for which buying back its shares while they are extremely undervalued, Amazon buying back shares when they are absurdly overvalued is a horrible use of capital.
post #79 of 132
Quote:
Originally Posted by Dr Millmoss View Post

But then, if you'd made the same bet a few years ago when AAPL was selling at a similar earnings multiple it would have been the wrong bet. Investors are willing to pay what seem, at the time, like outrageous premiums for growth stories. If the earnings don't follow then the stock price will deflate, eventually. I'm not putting any of my markers on AMZN but as someone who has held AAPL for nearly 15 years I can understand why someone might.


Was Apple selling for a hundred times earnings? If anyone paid that, they weren't smart...they were lucky. Because it would have been impossible to know that the iPhone and iPad would be created and take over the world.

In any case, Amazon's business model does not lend itself to some sudden miraculous new stream of earnings. And it's growth rate absolutely does not justify such a high multiple.

And anyone saying that the valuation makes sense just because that's what "the market" says, go back and look at what happened with many stocks during the Internet Bubble. I rest my case.
post #80 of 132
Quote:
Originally Posted by Dr Millmoss View Post

Really? Care to elaborate? Before you answer you might stop to think about whether my statement had anything to do with finance.

What did it have to do with? Cooking?
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