Buying TI's mobile chip division for billions of dollars would make Amazon a money loser.
Last quarter, Amazon only made $7 million in profit. Amazon lives in the slim profit world and loves living there.
Yet, it costs hundreds of millions to billions of dollars to keep churning out new chips each year. For example, Apple spent about $0.5 Billion to create the A6. And it will spend another amount to create the A7. And so on.
Since Apple is in the high profit margin world, it can afford to pay for the design of its own chips.
Amazon does not.
You clearly don't understand Amazon's business strategies. No company loves living in the slim profit word that's insane to assume. Amazon's break even quarter was the result of heavy investments in new technologies like the Kindle Fire where they sell the product at a slight loss in order to build market share. Amazon is a newcomer to the hardware technology table and they're rebuilding their business infrastructure around this post-pc media consumption industry, and right now that's costing them money. They are making long term investments at the expense of short term gains. And given Amazon's presence in the tablet market and the e-reader market, their strategies are working and they know it is. Not exactly rocket science.
You clearly don't understand Amazon's business strategies. No company loves living in the slim profit word that's insane to assume. Amazon's break even quarter was the result of heavy investments in new technologies like the Kindle Fire where they sell the product at a slight loss in order to build market share. Amazon is a newcomer to the hardware technology table and they're rebuilding their business infrastructure around this post-pc media consumption industry, and right now that's costing them money. They are making long term investments at the expense of short term gains. And given Amazon's presence in the tablet market and the e-reader market, their strategies are working and they know it is. Not exactly rocket science.
We don't know if their strategies are working yet. It's too early to know. What we do know is that these strategies are making their already slim profit margins slimmer, to none at all.
We can look to Microsoft as an example. They are a very profitable company. Nobody can deny that. And the have a thing called the Xbox. Before the 360, it was an also ran. But with the 360, it was in second place, and now, in first place. This is an important product category to Microsoft.
So one would expect that they would be making a decent profit on it. Or, if not, then games sales, licensing, accessories and the like would provide a decent profit
But no. I've the time since the first Xbox arrived, through the present time, Microsoft has lost over $8 billion on the entertainment division. This loss includes all the profits made from said game fees and accessories, which have been profitable. If we include the $1.3 billion in escrow for the "red ring of death" and other problems, the loss is even worse.
Now, you may not like Amazon being compared to Microsoft, but it's a very similar situation. Both companies are selling the hardware at a loss. Bezos is being very disingenuous when he says that they're breaking even on the hardware costs, because he isn't including all the other expenses involved with bringing it to market, as well as sales costs, marketing costs, warrantee costs, etc.
Content has a very small profit. On the order of 3-5%. So that's very little. Combine that with even a small loss per device, and there's almost no profit at all, and there never will be.
This is like his problem with the Amazon business model overall. He misunderstood what those costs would be as well. He thought it would take a small staff working on the website, accounting, marketing, etc. his concept was that all items would be shipped from either fulfillment centers (companies who do this for a small fee) or from the manufacturers and their distributors. He found, as did other online retailers, that it didn't work. So he's spent many billions on warehouses and shipping facilities he never expected to need.
This guy makes big mistakes. There is a good chance this is another.
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Quote:
Originally Posted by jameskatt2
Buying TI's mobile chip division for billions of dollars would make Amazon a money loser.
Last quarter, Amazon only made $7 million in profit. Amazon lives in the slim profit world and loves living there.
Yet, it costs hundreds of millions to billions of dollars to keep churning out new chips each year. For example, Apple spent about $0.5 Billion to create the A6. And it will spend another amount to create the A7. And so on.
Since Apple is in the high profit margin world, it can afford to pay for the design of its own chips.
Amazon does not.
You clearly don't understand Amazon's business strategies. No company loves living in the slim profit word that's insane to assume. Amazon's break even quarter was the result of heavy investments in new technologies like the Kindle Fire where they sell the product at a slight loss in order to build market share. Amazon is a newcomer to the hardware technology table and they're rebuilding their business infrastructure around this post-pc media consumption industry, and right now that's costing them money. They are making long term investments at the expense of short term gains. And given Amazon's presence in the tablet market and the e-reader market, their strategies are working and they know it is. Not exactly rocket science.
We don't know if their strategies are working yet. It's too early to know. What we do know is that these strategies are making their already slim profit margins slimmer, to none at all.
We can look to Microsoft as an example. They are a very profitable company. Nobody can deny that. And the have a thing called the Xbox. Before the 360, it was an also ran. But with the 360, it was in second place, and now, in first place. This is an important product category to Microsoft.
So one would expect that they would be making a decent profit on it. Or, if not, then games sales, licensing, accessories and the like would provide a decent profit
But no. I've the time since the first Xbox arrived, through the present time, Microsoft has lost over $8 billion on the entertainment division. This loss includes all the profits made from said game fees and accessories, which have been profitable. If we include the $1.3 billion in escrow for the "red ring of death" and other problems, the loss is even worse.
Now, you may not like Amazon being compared to Microsoft, but it's a very similar situation. Both companies are selling the hardware at a loss. Bezos is being very disingenuous when he says that they're breaking even on the hardware costs, because he isn't including all the other expenses involved with bringing it to market, as well as sales costs, marketing costs, warrantee costs, etc.
Content has a very small profit. On the order of 3-5%. So that's very little. Combine that with even a small loss per device, and there's almost no profit at all, and there never will be.
This is like his problem with the Amazon business model overall. He misunderstood what those costs would be as well. He thought it would take a small staff working on the website, accounting, marketing, etc. his concept was that all items would be shipped from either fulfillment centers (companies who do this for a small fee) or from the manufacturers and their distributors. He found, as did other online retailers, that it didn't work. So he's spent many billions on warehouses and shipping facilities he never expected to need.
This guy makes big mistakes. There is a good chance this is another.