Again, you're looking for similarities in HOW companies are getting to where they need to be... I'm focusing on where they need to be to compete, and Amazon's purported tactics to get there
First: All Corporate/Customer relationships are a competition. Corps want maximum profit (reven/cost), Customers want maximum value (function/cost).
And Apple has shat on it's customers (mac pro, XServe, OS 9 to OS X, Lightning Bolt connectors) in the past to get to a place where then needed to go as a company. How many apple developers (another 'customer' of Apple's) were smiling happy and glad when the new App Store Rules came out. Apple never delivers everything their customers want... just enough to sell them a new devices
Again, my point (orthogonal to yours) is it's not about 'customers' it's about the path to maximum sustainable 'profit.' and reducing dependency in your partners (as each partner must takes it's profit as well...
Apple by far and away was the first in trying to get closer to the money... to the individual who uses the thing they buy, and to do so, Apple built a compelling end to end experience... even buying an apple thing is 'fun.' But to do so, they 'bet the bank' several times flying against conventional wisdom (not the least of which was taking Steve back on board). And Apple pissed off customers and software and OEM and sales partners continually.
And we think Amazon is taking a big risk?;-)
Microsoft sold to the corporate buyer. Google sold to the Advertising dept. But make no mistake, All of them are trying to morph their key products (Amazon: a retail virtual marketplace, google, eyeballs for sale, microsoft, corporate productivity) into a model that can be sold via an ecosystem that meets 'most' of what you want without leaving it.
The problem is Apple has built an ecosystem that starts with the device... it's not a 'PC' (generic), it's an iPhone 5. Apple is now extending that lead by building custom chips to make those devices even more responsive. Any smart person can see that current trends are leading that people with disposable income are buying iPhones and iPads. Google/Amazon/Microsoft have to compete on this, and wherever they are, they are doing what it takes to be competitive.
Bezos to me is the only _guy_ that is focused/bold/bright/ enough to compete (out Apple) with Apple. Google is too fractured and Microsoft is bumbling.
I do think that Amazon is cash poor and can't make this move, but it may be the 'bet the business' move that you need to do, especially against Google, who is the only company with the infrastructure to effectively build out a competitor to Amazon's core business.
I agree with much of what you're saying, but you, and a lot of others, are giving Bezos too much credit.
He has badly underestimated how his business could be run. While Amazon has grown dramatically, there is little to show for it. His original idea is in the ashbin. He grows by putting almost all of his capital into new warehouses and shipping centers. While that looks good, it's a major problem, and one investors don't seem to understand. His promises, goi g back years now, was that Amazon would "soon" show all those profits he was promising. But it never will, because Amazon is stuck in the expansion loop he put in in. Like so e old empires of the past, if he stops expanding, it collapses.
It leaves Amazon with incentive to only keep doing what they are doing. Which is to chase their tail.
The original Kindle wasn't an original idea. There have been book readers goi g back at least 20 years. One of the first was from Franklin Computers, who were killed in court by Apple for. Copying the Apple II. They then went into book readers. It never became a big business because the readers were too small, and the books were too expensive. A common problem. Amazon got into the. Kindle business just as e-books were beginning to take off. They helped that, but it took years, with little to show for it for Amazon.
Now, they into losing money on tablets. Well, good luck with that! A phone? Seriously? Are they Intending to lose money on them too? Is their entire hardware business going to be set up with the idea of losing money?
One thing about Bezos is that he's a a great con man. One of the best.
I mentioned how unforgiving this market is to companies that fall behind. Asymco had a graph of dozens of companies that have been in this battle over the last thirty years. Buying the assets of a loser like Sony Ericsson or Motorola has not yet been a winning strategy. It may finally be time to short Amazon. There are 2 good reasons Apple has been holding on to its Billions in spare cash. Tax implications and emergency cash to survive a missed product cycle. Apple is one of the very few near death survivors of this blood bath. Steve Jobs even sold all of his remaining stake in Apple before he attempted to turn it around. This is not a game, it is a war of attrition. Paranoia is not a side effect of being in this battle, it is a necessary part of good management. If Amazon is serious about this they will need tens of billions of dollars of cash and be willing to accept a much lower PE going forward. I do not see how that is possible.
I agree with much of what you're saying, but you, and a lot of others, are giving Bezos too much credit.
He has badly underestimated how his business could be run. While Amazon has grown dramatically, there is little to show for it. His original idea is in the ashbin. He grows by putting almost all of his capital into new warehouses and shipping centers. While that looks good, it's a major problem, and one investors don't seem to understand. His promises, goi g back years now, was that Amazon would "soon" show all those profits he was promising. But it never will, because Amazon is stuck in the expansion loop he put in in. Like so e old empires of the past, if he stops expanding, it collapses.
[...]
One thing about Bezos is that he's a a great con man. One of the best.
I think we are violently in agreement. But because he's in that expansion loop, he can't lose control of the consumer end. It's the only thing feeding the monster. And he swings for the fences, always.
A lot of people said Steve Jobs was a great con man (just stating an observation, not a comparison).
Personally, I think once 'the device' hits a tipping point, this becomes a brutally this easy... the Amazon model will just click into being the norm ("Siri, I'm making this recipe this weekend, please add the ingredients to my order, enough for 10 people'... oh, and I need 2 bottles of Pinot Noir, as well" Siri: "I just checked and Amazon can have it here on Thursday for $98.43. Shall I confirm, delay delivery to Friday, or cancel?")
The key thing for Amazon is do you let Siri do the deciding (and decide to use Walmart, or Target, or whomever), or do you use your A9 based system to do the deciding. And it seems that means you need to control the device.
Yes, I see egos at play here. Partnering or division of profits isn't in the cards, it's total control of your destiny or die trying.
[...] Buying the assets of a loser like Sony Ericsson or Motorola has not yet been a winning strategy. It may finally be time to short Amazon. There are 2 good reasons Apple has been holding on to its Billions in spare cash. Tax implications and emergency cash to survive a missed product cycle. Apple is one of the very few near death survivors of this blood bath. Steve Jobs even sold all of his remaining stake in Apple before he attempted to turn it around. This is not a game, it is a war of attrition. Paranoia is not a side effect of being in this battle, it is a necessary part of good management. If Amazon is serious about this they will need tens of billions of dollars of cash and be willing to accept a much lower PE going forward. I do not see how that is possible.
Interesting
But as Apple is deemed undervalued by the market, Amazon has always been a Wall Street Darling. Amazon sells stuff people buy, and it has real customers, and customer buying history (google just has 'viewing history'). I agree at some point it has to sell at a profit level deemed worthy of the multiple.
In general I'm in alignment with these thoughts. I do however, disagree with the underlying issue.
I also think the 'non-laptop mobile market' is morphing into the 'personal device' market. You will have a home 'computer' and everyone your household will have a 'personal device' (or 5). That device is 'your interface' to the general consumer world. it's your menu, your newspaper, your radio, your gameboy, your TV, your movie theater, your pizza delivery device.
It's not about mobility, it's about ease of transaction.
To meet the "ease of transaction" test, in many (if not most) cases the device must be mobile -- it should be just as easy to by a pizza from the livingroom couch, your bedroom, the soccer field or the pizza parlor.
Quote:
Originally Posted by TheOtherGeoff
Apple is building a near lock in the 'personal device' for people with 'disposable income' Amazon sees this a potential disintermediator for its digital content and well as hard goods delivery system (Those 400Million credit cards attached to AppleIDs). Books, MP3s, Videos are one thing, but with those 400Million AppleIDs with active credit cards, Apple can pretty much walk into any consumer market and say, "we can do the same as Amazon does." That's gotta scare Amazon.
Yes, Apple could (but would they?) go to the Wal-Marts, Targets, BestBuys, etc. and say: "Today you provide a "show room" service for people to buy online though Amazon -- and you get nothing. We can provide a service where the customer chooses the most convenient and expeditious service (online or in-store) and youget the sale."
Quote:
Originally Posted by TheOtherGeoff
Amazon needs transactions, and Google needs eyeballs, and Microsoft, well Microsoft needs a lot of things.
Hence you're seeing all of them trying to get a piece of the end device market, and the differentiators will be quality of build, quality of SW, Quality of performance, and integration to your core ecosystem, while support of other ecosystems via app integration (you pay for your app to be put on someone else's device) or HTML5. (and we saw how that worked for Facebook).
Hence the reason why all of these corporations are racing to compete with Apple, and will burn any bridge needed to get there, as the long term viability of their business models depend on being that 'personal device.'
I don't agree that the long-term viability of the business models of MS, Google or amazon necessarily had/has to depend upo providing or controlling "that personal device".
As I posted earlier, had these companies stuck to their areas of expertise, they could have co-existed with Apple's business model -- and profited greatly from it.
I don't really believe that Apple wanted (or planed to) get into sophisticated Office Suites and online services, ads, searches, online [general] hard-goods sales, etc. However, Google, MS and Amazon are attempting to use those capabilities to compete with Apple on Apple's chosen turf:
MS has had years to make a usable Office on the iPad -- instead they attempt head-on device competition
Google chose to compete with Apple on mobile, OS and maps features -- and now, on devices
Amazon chose to offer competitive digital media -- and now on devices
Consider for a moment... Say Tim takes Michael Dell's advice and shuts Apple down...
Who, among MS, Google Amazon and Sammy will fill the void? Which one will provide "that personal device"?
I think we are violently in agreement. But because he's in that expansion loop, he can't lose control of the consumer end. It's the only thing feeding the monster. And he swings for the fences, always.
A lot of people said Steve Jobs was a great con man (just stating an observation, not a comparison).
Personally, I think once 'the device' hits a tipping point, this becomes a brutally this easy... the Amazon model will just click into being the norm ("Siri, I'm making this recipe this weekend, please add the ingredients to my order, enough for 10 people'... oh, and I need 2 bottles of Pinot Noir, as well" Siri: "I just checked and Amazon can have it here on Thursday for $98.43. Shall I confirm, delay delivery to Friday, or cancel?")
The key thing for Amazon is do you let Siri do the deciding (and decide to use Walmart, or Target, or whomever), or do you use your A9 based system to do the deciding. And it seems that means you need to control the device.
Yes, I see egos at play here. Partnering or division of profits isn't in the cards, it's total control of your destiny or die trying.
SJ wasn't a con man because he delivered sales AND profits. All he ever said was that they hoped people would buy their products because they liked them. Bezos has been promising profits for years, and hasn't delivered. He won't deliver here either.
I don't see what any of this has to do with Amazon buying the TI chip division. In fact, there seems to be a lot of skepticism over this:
It seems to me that Amazon would be better off maki g it as easy as possible to buy their stuff from other tablets and phones. And there, they've done a good job. I've got the Amazon app from which I buy a lot of their products, including a lot of CD's, but also an air conditioner a couple of months ago. They also have what I think of as a window shopping app.
The better, and easier they make shopping on my iPad and phone, the more I will buy from them. I don't need their tablet for that. And indeed, that could become very annoying if it constantly sends me to them when I want to go somewhere else.
I even wonder if Bezos isn't in so deep that he won't be able to admit it if this becomes a failure (or is already).
[...] Buying the assets of a loser like Sony Ericsson or Motorola has not yet been a winning strategy. It may finally be time to short Amazon. There are 2 good reasons Apple has been holding on to its Billions in spare cash. Tax implications and emergency cash to survive a missed product cycle. Apple is one of the very few near death survivors of this blood bath. Steve Jobs even sold all of his remaining stake in Apple before he attempted to turn it around. This is not a game, it is a war of attrition. Paranoia is not a side effect of being in this battle, it is a necessary part of good management. If Amazon is serious about this they will need tens of billions of dollars of cash and be willing to accept a much lower PE going forward. I do not see how that is possible.
Interesting
But as Apple is deemed undervalued by the market, Amazon has always been a Wall Street Darling. Amazon sells stuff people buy, and it has real customers, and customer buying history (google just has 'viewing history'). I agree at some point it has to sell at a profit level deemed worthy of the multiple.
IMO, the valuation of Amazon vs Apple is based upon the market's understanding of what these two companies do -- in effect a mutation of Parkinson's Law of Triviality::
“the time spent on any item of the agenda will be in inverse proportion to the sum involved.”
becomes:
“the worth of an enterprise will be in inverse proportion to the value of the service it provides.”
Very few understand what it takes to make computers -- everyone understands buying a book!
But as Apple is deemed undervalued by the market, Amazon has always been a Wall Street Darling. Amazon sells stuff people buy, and it has real customers, and customer buying history (google just has 'viewing history'). I agree at some point it has to sell at a profit level deemed worthy of the multiple.
The problem is that at some point, investors will become tired of waiting for failed promises. The other problem they have is that very high P/E of over 300. That's an absurd number no matter what anyone thinks. If investors think "fool me once, shame on me, fool me twice, shame on you", they may pull out of the company. If that becomes a rout, and it can with such a high P/E, then the stock can drop to a twentieth of what it is now, and still have a P/E around what Apple will have. Then, the stock could be priced appropriately, assuming that large profits don't suddenly materialize.
But that would wipe out everyone's investments, and probably take down a lot of other tech stocks in the market's irrationality.
IMO, the valuation of Amazon vs Apple is based upon the market's understanding of what these two companies do -- in effect a mutation of Parkinson's Law of Triviality::
<span style="color:rgb(242,249,254);font-family:Geneva, Tahoma, Verdana, sans-serif;font-size:16px;line-height:21px;background-color:rgb(77,77,77);">“the time spent on any item of the agenda will be in inverse proportion to the sum involved.”</span>
becomes:
<span style="color:rgb(242,249,254);font-family:Geneva, Tahoma, Verdana, sans-serif;font-size:16px;line-height:21px;background-color:rgb(77,77,77);">“the worth of an enterprise will be in inverse proportion to the value of the service it provides.”</span>
Very few understand what it takes to make computers -- everyone understands buying a book!
Well Geoff, I'm certain that everyone is suitably impressed with your brilliance, or not.
An interesting thought process. State the obvious, contradict yourself, make silly observations and analogies, and finally draw questionable conclusions.
For Amazon, with .30 per share earnings through 2Q and $5B in liquid assets, to invest billions in a non-core a activity to support its low margin e-commerce business is a highly questionable strategy, when they could accomplish the same end by partnering with a chip maker. I doubt it will happen. If it does I'll publically eat crow. And short AMZN shares.
To all those who dis Amazon's P/E - from the get go Bezos has always been about growing Amazon as fast as possible and plugging every available cent back into the business as any smart CEO does in a high growth phase of the a business. If Bezos listened to wall street, Amazon would still be only selling books. If Amazon wanted they could stop R&D and have a huge P/E at any point - but why? stop growing and give the money to shareholders instead of building your empire?
Bezos (along with Musk) are the next Jobs, and people with big ambitions are not about placating wall street leeches, they are about building empires and building the resources and stuff that they want.
Look at Amazon's growth rate - they are putting bricks and mortars out of business and are tenacious and unstoppable using their huge recurring sales revenue to subsidize entries into whatever new markets they want.
I'm a huge Apple fan, but at the end of the day I think Amazon has the best chance of winning the war between Google, Apple and Microsoft. People are cheap and lazy - Google and Amazon both cater to that, but it is cheaper to build up an information business then a selling stuff business. People won't pay the high prices for Microsoft and Apple down the road (I'm looking 10-20 years) without innovative geniuses at the helm. Also I agree with others here that a good chunk of Google's empire is based on theft of copy-writed materials (e.g. youtube) which will eventually come to haunt them.
The fact that Amazon's stock is so high, and that investors continue to put up with their crap - that is, spending money in ways that are not core to their business, is mind boggling. Amazon is trading at ridiculous multiples, doesn't seem to know how to make money, yet spends money faster than the US government! And in non-core assets at that. (Especially compared to Apple's stock performance as they make money by the boatload.)
Android tablets are a commodity business, especially as both Amazon, Google, and now MSFT, have decided that they don't need to make money on the actual devices. There are several manufacturers that are quite capable of designing and building their kindle devices for them, yet they somehow seem to think they can do a better job while spending billions building up a team, assets and infrastructure to do it themselves, all for a product that they lose money on. They would be far better off just contracting with an Asian manufacturer to do all the design and manufacturing for them, then continue to sell at a loss as they are now, but without all the overhead they are creating.
Except for this slim profit margin drive Bezos thinks like Steve Jobs*. This complacency with thin profit margins is also one of the things that could hurt Apple in the long term if Amazon doesn't have any major upsets with their very narrow homeostasis. They certainly have a mindshare and ecosystem that are powerful. I don't think we've ever seen this before in business. This could be history in the making.
To all those who dis Amazon's P/E - from the get go Bezos has always been about growing Amazon as fast as possible and plugging every available cent back into the business as any smart CEO does in a high growth phase of the a business. If Bezos listened to wall street, Amazon would still be only selling books. If Amazon wanted they could stop R&D and have a huge P/E at any point - but why? stop growing and give the money to shareholders instead of building your empire?
Bezos (along with Musk) are the next Jobs, and people with big ambitions are not about placating wall street leeches, they are about building empires and building the resources and stuff that they want.
Look at Amazon's growth rate - they are putting bricks and mortars out of business and are tenacious and unstoppable using their huge recurring sales revenue to subsidize entries into whatever new markets they want.
I'm a huge Apple fan, but at the end of the day I think Amazon has the best chance of winning the war between Google, Apple and Microsoft. People are cheap and lazy - Google and Amazon both cater to that, but it is cheaper to build up an information business then a selling stuff business. People won't pay the high prices for Microsoft and Apple down the road (I'm looking 10-20 years) without innovative geniuses at the helm. Also I agree with others here that a good chunk of Google's empire is based on theft of copy-writed materials (e.g. youtube) which will eventually come to haunt them.
That's very nice, but it's also wrong. All businesses must make a decent profit. Amazon doesn't do that. Bezos has PROMISED that they will, for several years now, and hasn't.
Growth without profits is empty growth. If the slightest problem occurs, that will degenerate into serious losses.
Also, Amazon doesn't do much R&D, so I don't know where you get the idea they do. They haven't designed their tablets either. The first Fire, for example, was just a cheaper version of the RIM Playbook, literally. The others have mostly been designed by outside firms.
I like buying from Amazon, but they're wasting their time on this, assuming its even true.
Except for this slim profit margin drive Bezos thinks like Steve Jobs*. This complacency with thin profit margins is also one of the things that could hurt Apple in the long term if Amazon doesn't have any major upsets with their very narrow homeostasis. They certainly have a mindshare and ecosystem that are powerful. I don't think we've ever seen this before in business. This could be history in the making.
* I did not say he is Steve Jobs.
So how does he think like SJ? I'd like to know that. I see that being said, but I don't see the similarities. Yes, Amazon is a success, if success is defined by growth verging on losses every quarter.
How will Amazon's complacency with thin, and even non existent margins hurt Apple? We haven't seen a problem so far, what problem will we see in the future? Their tablets are ok, but not great, according to reviews. The Fire, sold well for a quarter, then almost died. The Kindle readers aren't a threat, as we've seen. A phone? I can barely envision an Amazon phone, though its always possible, though also likely not a great idea.
They started a music service several years ago and undercut Apple on price, but despite that, they've never gained more than an 8% marketshare. The only place where they do well is in books, where they take losses there in order to monopolize that market. That may still fail.
Nobody has mentioned this, but the biggest attraction of buying Amazon was "no taxes"... This is disappearing or has disappeared -- in CA we pay sales tax on Amazon orders.
Availibility and fast, low cost or free delivery was also an attraction... But that is now being matched or surpassed by others.
Last, the ratings were valuable... If you could believe the poster... As Amazon began offering their own products, their ratings and their ratings of competitive products became suspect... Yeah, what's the best selling tablet? Yeah, right!
Today, Amazon has dissipated their advantages... And have little prospect for growth!
Most Silicon valley companies don't make much profit and even if they do it doesn't get passed on to shareholders. Until this year Apple was one of them. As a shareholder, other then dividends, your stock price is mostly based on growth and growth potential - thus Amazon's lofty price
If you don't have dividends there are two ways to spend your corporate $$$
1) put it in the bank and use it to grow via acquisition and buying out the competition --> more the Apple philosophy - though they should do a lot more of #2 in my opinion.
2) put it into your business and grow internally (this includes using the $$ to have razor thin margins to bury the competition) --> e.g. Amazon
Nobody has mentioned this, but the biggest attraction of buying Amazon was "no taxes"... This is disappearing or has disappeared -- in CA we pay sales tax on Amazon orders.
Availibility and fast, low cost or free delivery was also an attraction... But that is now being matched or surpassed by others.
Last, the ratings were valuable... If you could believe the poster... As Amazon began offering their own products, their ratings and their ratings of competitive products became suspect... Yeah, what's the best selling tablet? Yeah, right!
Today, Amazon has dissipated their advantages... And have little prospect for growth!
Most Silicon valley companies don't make much profit and even if they do it doesn't get passed on to shareholders. Until this year Apple was one of them. As a shareholder, other then dividends, your stock price is mostly based on growth and growth potential - thus Amazon's lofty price
If you don't have dividends there are two ways to spend your corporate $$$
1) put it in the bank and use it to grow via acquisition and buying out the competition --> more the Apple philosophy - though they should do a lot more of #2 in my opinion.
2) put it into your business and grow internally (this includes using the $$ to have razor thin margins to bury the competition) --> e.g. Amazon
That's ludicrous! What's with your obsession with thin margins? No company wants thin margins. It's forced upon them.
Apple is a far more successful company that Amazon.
Comments
I agree with much of what you're saying, but you, and a lot of others, are giving Bezos too much credit.
He has badly underestimated how his business could be run. While Amazon has grown dramatically, there is little to show for it. His original idea is in the ashbin. He grows by putting almost all of his capital into new warehouses and shipping centers. While that looks good, it's a major problem, and one investors don't seem to understand. His promises, goi g back years now, was that Amazon would "soon" show all those profits he was promising. But it never will, because Amazon is stuck in the expansion loop he put in in. Like so e old empires of the past, if he stops expanding, it collapses.
It leaves Amazon with incentive to only keep doing what they are doing. Which is to chase their tail.
The original Kindle wasn't an original idea. There have been book readers goi g back at least 20 years. One of the first was from Franklin Computers, who were killed in court by Apple for. Copying the Apple II. They then went into book readers. It never became a big business because the readers were too small, and the books were too expensive. A common problem. Amazon got into the. Kindle business just as e-books were beginning to take off. They helped that, but it took years, with little to show for it for Amazon.
Now, they into losing money on tablets. Well, good luck with that! A phone? Seriously? Are they Intending to lose money on them too? Is their entire hardware business going to be set up with the idea of losing money?
One thing about Bezos is that he's a a great con man. One of the best.
Quote:
Originally Posted by melgross
I agree with much of what you're saying, but you, and a lot of others, are giving Bezos too much credit.
He has badly underestimated how his business could be run. While Amazon has grown dramatically, there is little to show for it. His original idea is in the ashbin. He grows by putting almost all of his capital into new warehouses and shipping centers. While that looks good, it's a major problem, and one investors don't seem to understand. His promises, goi g back years now, was that Amazon would "soon" show all those profits he was promising. But it never will, because Amazon is stuck in the expansion loop he put in in. Like so e old empires of the past, if he stops expanding, it collapses.
[...]
One thing about Bezos is that he's a a great con man. One of the best.
I think we are violently in agreement. But because he's in that expansion loop, he can't lose control of the consumer end. It's the only thing feeding the monster. And he swings for the fences, always.
A lot of people said Steve Jobs was a great con man (just stating an observation, not a comparison).
Personally, I think once 'the device' hits a tipping point, this becomes a brutally this easy... the Amazon model will just click into being the norm ("Siri, I'm making this recipe this weekend, please add the ingredients to my order, enough for 10 people'... oh, and I need 2 bottles of Pinot Noir, as well" Siri: "I just checked and Amazon can have it here on Thursday for $98.43. Shall I confirm, delay delivery to Friday, or cancel?")
The key thing for Amazon is do you let Siri do the deciding (and decide to use Walmart, or Target, or whomever), or do you use your A9 based system to do the deciding. And it seems that means you need to control the device.
Yes, I see egos at play here. Partnering or division of profits isn't in the cards, it's total control of your destiny or die trying.
Quote:
Originally Posted by Macnewsjunkie
[...] Buying the assets of a loser like Sony Ericsson or Motorola has not yet been a winning strategy. It may finally be time to short Amazon. There are 2 good reasons Apple has been holding on to its Billions in spare cash. Tax implications and emergency cash to survive a missed product cycle. Apple is one of the very few near death survivors of this blood bath. Steve Jobs even sold all of his remaining stake in Apple before he attempted to turn it around. This is not a game, it is a war of attrition. Paranoia is not a side effect of being in this battle, it is a necessary part of good management. If Amazon is serious about this they will need tens of billions of dollars of cash and be willing to accept a much lower PE going forward. I do not see how that is possible.
Interesting
But as Apple is deemed undervalued by the market, Amazon has always been a Wall Street Darling. Amazon sells stuff people buy, and it has real customers, and customer buying history (google just has 'viewing history'). I agree at some point it has to sell at a profit level deemed worthy of the multiple.
Quote:
Originally Posted by TheOtherGeoff
In general I'm in alignment with these thoughts. I do however, disagree with the underlying issue.
I also think the 'non-laptop mobile market' is morphing into the 'personal device' market. You will have a home 'computer' and everyone your household will have a 'personal device' (or 5). That device is 'your interface' to the general consumer world. it's your menu, your newspaper, your radio, your gameboy, your TV, your movie theater, your pizza delivery device.
It's not about mobility, it's about ease of transaction.
To meet the "ease of transaction" test, in many (if not most) cases the device must be mobile -- it should be just as easy to by a pizza from the livingroom couch, your bedroom, the soccer field or the pizza parlor.
Quote:
Originally Posted by TheOtherGeoff
Apple is building a near lock in the 'personal device' for people with 'disposable income' Amazon sees this a potential disintermediator for its digital content and well as hard goods delivery system (Those 400Million credit cards attached to AppleIDs). Books, MP3s, Videos are one thing, but with those 400Million AppleIDs with active credit cards, Apple can pretty much walk into any consumer market and say, "we can do the same as Amazon does." That's gotta scare Amazon.
Yes, Apple could (but would they?) go to the Wal-Marts, Targets, BestBuys, etc. and say: "Today you provide a "show room" service for people to buy online though Amazon -- and you get nothing. We can provide a service where the customer chooses the most convenient and expeditious service (online or in-store) and you get the sale."
Quote:
Originally Posted by TheOtherGeoff
Amazon needs transactions, and Google needs eyeballs, and Microsoft, well Microsoft needs a lot of things.
Hence you're seeing all of them trying to get a piece of the end device market, and the differentiators will be quality of build, quality of SW, Quality of performance, and integration to your core ecosystem, while support of other ecosystems via app integration (you pay for your app to be put on someone else's device) or HTML5. (and we saw how that worked for Facebook).
Hence the reason why all of these corporations are racing to compete with Apple, and will burn any bridge needed to get there, as the long term viability of their business models depend on being that 'personal device.'
I don't agree that the long-term viability of the business models of MS, Google or amazon necessarily had/has to depend upo providing or controlling "that personal device".
As I posted earlier, had these companies stuck to their areas of expertise, they could have co-existed with Apple's business model -- and profited greatly from it.
I don't really believe that Apple wanted (or planed to) get into sophisticated Office Suites and online services, ads, searches, online [general] hard-goods sales, etc. However, Google, MS and Amazon are attempting to use those capabilities to compete with Apple on Apple's chosen turf:
MS has had years to make a usable Office on the iPad -- instead they attempt head-on device competition
Google chose to compete with Apple on mobile, OS and maps features -- and now, on devices
Amazon chose to offer competitive digital media -- and now on devices
Consider for a moment... Say Tim takes Michael Dell's advice and shuts Apple down...
Who, among MS, Google Amazon and Sammy will fill the void? Which one will provide "that personal device"?
SJ wasn't a con man because he delivered sales AND profits. All he ever said was that they hoped people would buy their products because they liked them. Bezos has been promising profits for years, and hasn't delivered. He won't deliver here either.
I don't see what any of this has to do with Amazon buying the TI chip division. In fact, there seems to be a lot of skepticism over this:
http://buzz.money.cnn.com/2012/10/15/amazon-texas-instruments/
It seems to me that Amazon would be better off maki g it as easy as possible to buy their stuff from other tablets and phones. And there, they've done a good job. I've got the Amazon app from which I buy a lot of their products, including a lot of CD's, but also an air conditioner a couple of months ago. They also have what I think of as a window shopping app.
The better, and easier they make shopping on my iPad and phone, the more I will buy from them. I don't need their tablet for that. And indeed, that could become very annoying if it constantly sends me to them when I want to go somewhere else.
I even wonder if Bezos isn't in so deep that he won't be able to admit it if this becomes a failure (or is already).
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Originally Posted by TheOtherGeoff
Quote:
Originally Posted by Macnewsjunkie
[...] Buying the assets of a loser like Sony Ericsson or Motorola has not yet been a winning strategy. It may finally be time to short Amazon. There are 2 good reasons Apple has been holding on to its Billions in spare cash. Tax implications and emergency cash to survive a missed product cycle. Apple is one of the very few near death survivors of this blood bath. Steve Jobs even sold all of his remaining stake in Apple before he attempted to turn it around. This is not a game, it is a war of attrition. Paranoia is not a side effect of being in this battle, it is a necessary part of good management. If Amazon is serious about this they will need tens of billions of dollars of cash and be willing to accept a much lower PE going forward. I do not see how that is possible.
Interesting
But as Apple is deemed undervalued by the market, Amazon has always been a Wall Street Darling. Amazon sells stuff people buy, and it has real customers, and customer buying history (google just has 'viewing history'). I agree at some point it has to sell at a profit level deemed worthy of the multiple.
IMO, the valuation of Amazon vs Apple is based upon the market's understanding of what these two companies do -- in effect a mutation of Parkinson's Law of Triviality::
“the time spent on any item of the agenda will be in inverse proportion to the sum involved.”
becomes:
“the worth of an enterprise will be in inverse proportion to the value of the service it provides.”
Very few understand what it takes to make computers -- everyone understands buying a book!
The problem is that at some point, investors will become tired of waiting for failed promises. The other problem they have is that very high P/E of over 300. That's an absurd number no matter what anyone thinks. If investors think "fool me once, shame on me, fool me twice, shame on you", they may pull out of the company. If that becomes a rout, and it can with such a high P/E, then the stock can drop to a twentieth of what it is now, and still have a P/E around what Apple will have. Then, the stock could be priced appropriately, assuming that large profits don't suddenly materialize.
But that would wipe out everyone's investments, and probably take down a lot of other tech stocks in the market's irrationality.
Interesting point.
An interesting thought process. State the obvious, contradict yourself, make silly observations and analogies, and finally draw questionable conclusions.
For Amazon, with .30 per share earnings through 2Q and $5B in liquid assets, to invest billions in a non-core a activity to support its low margin e-commerce business is a highly questionable strategy, when they could accomplish the same end by partnering with a chip maker. I doubt it will happen. If it does I'll publically eat crow. And short AMZN shares.
To all those who dis Amazon's P/E - from the get go Bezos has always been about growing Amazon as fast as possible and plugging every available cent back into the business as any smart CEO does in a high growth phase of the a business. If Bezos listened to wall street, Amazon would still be only selling books. If Amazon wanted they could stop R&D and have a huge P/E at any point - but why? stop growing and give the money to shareholders instead of building your empire?
Bezos (along with Musk) are the next Jobs, and people with big ambitions are not about placating wall street leeches, they are about building empires and building the resources and stuff that they want.
Look at Amazon's growth rate - they are putting bricks and mortars out of business and are tenacious and unstoppable using their huge recurring sales revenue to subsidize entries into whatever new markets they want.
I'm a huge Apple fan, but at the end of the day I think Amazon has the best chance of winning the war between Google, Apple and Microsoft. People are cheap and lazy - Google and Amazon both cater to that, but it is cheaper to build up an information business then a selling stuff business. People won't pay the high prices for Microsoft and Apple down the road (I'm looking 10-20 years) without innovative geniuses at the helm. Also I agree with others here that a good chunk of Google's empire is based on theft of copy-writed materials (e.g. youtube) which will eventually come to haunt them.
The fact that Amazon's stock is so high, and that investors continue to put up with their crap - that is, spending money in ways that are not core to their business, is mind boggling. Amazon is trading at ridiculous multiples, doesn't seem to know how to make money, yet spends money faster than the US government! And in non-core assets at that. (Especially compared to Apple's stock performance as they make money by the boatload.)
Android tablets are a commodity business, especially as both Amazon, Google, and now MSFT, have decided that they don't need to make money on the actual devices. There are several manufacturers that are quite capable of designing and building their kindle devices for them, yet they somehow seem to think they can do a better job while spending billions building up a team, assets and infrastructure to do it themselves, all for a product that they lose money on. They would be far better off just contracting with an Asian manufacturer to do all the design and manufacturing for them, then continue to sell at a loss as they are now, but without all the overhead they are creating.
* [SIZE=2]I did not say he is Steve Jobs.[/SIZE]
That's very nice, but it's also wrong. All businesses must make a decent profit. Amazon doesn't do that. Bezos has PROMISED that they will, for several years now, and hasn't.
Growth without profits is empty growth. If the slightest problem occurs, that will degenerate into serious losses.
Also, Amazon doesn't do much R&D, so I don't know where you get the idea they do. They haven't designed their tablets either. The first Fire, for example, was just a cheaper version of the RIM Playbook, literally. The others have mostly been designed by outside firms.
I like buying from Amazon, but they're wasting their time on this, assuming its even true.
So how does he think like SJ? I'd like to know that. I see that being said, but I don't see the similarities. Yes, Amazon is a success, if success is defined by growth verging on losses every quarter.
How will Amazon's complacency with thin, and even non existent margins hurt Apple? We haven't seen a problem so far, what problem will we see in the future? Their tablets are ok, but not great, according to reviews. The Fire, sold well for a quarter, then almost died. The Kindle readers aren't a threat, as we've seen. A phone? I can barely envision an Amazon phone, though its always possible, though also likely not a great idea.
They started a music service several years ago and undercut Apple on price, but despite that, they've never gained more than an 8% marketshare. The only place where they do well is in books, where they take losses there in order to monopolize that market. That may still fail.
So, you've lost me here.
Availibility and fast, low cost or free delivery was also an attraction... But that is now being matched or surpassed by others.
Last, the ratings were valuable... If you could believe the poster... As Amazon began offering their own products, their ratings and their ratings of competitive products became suspect... Yeah, what's the best selling tablet? Yeah, right!
Today, Amazon has dissipated their advantages... And have little prospect for growth!
Most Silicon valley companies don't make much profit and even if they do it doesn't get passed on to shareholders. Until this year Apple was one of them. As a shareholder, other then dividends, your stock price is mostly based on growth and growth potential - thus Amazon's lofty price
If you don't have dividends there are two ways to spend your corporate $$$
1) put it in the bank and use it to grow via acquisition and buying out the competition --> more the Apple philosophy - though they should do a lot more of #2 in my opinion.
2) put it into your business and grow internally (this includes using the $$ to have razor thin margins to bury the competition) --> e.g. Amazon
I'm paying taxes to Amazon here in NY as well.
That's ludicrous! What's with your obsession with thin margins? No company wants thin margins. It's forced upon them.
Apple is a far more successful company that Amazon.