Apple's record profits contrasted with Amazon's hopes to turn a profit

Posted:
in iPad edited January 2014
Apple's profits for fiscal 2012 reached above $40 billion, making it the only tech company to ever reach that benchmark. In fact, it's a feat only ever matched by oil giant Exxon Mobil.

Apple's financial performance invites comparisons with other companies such as Amazon, which has taunted the iPad maker with a rival business plan oriented around ad and content sales, rather than seeking to earn profits primarily on hardware.

A report by Bloomberg writer Mark Gimein contrasted the two companies, noting that while Apple reported quarterly earnings of $13.5 billion this winter, Amazon has only reported a total of $5 billion in earnings spanning from 2003, the first year it turned a profit, through the end of 2011, the full last year it has reported earnings.

In the previous quarter, Amazon actually lost $274 million, but Gimein states the company is "expected to turn a profit" for 2012.

"By conventional metrics," Gimein writes, "Amazon?s earning are so low that it?s almost senseless to talk about them."

He added, "Apple makes so much money that investors are leery of whether it can continue growing. In stark contrast, Amazon has made so little that, paradoxically, it continues to hold out the prospect of limitless growth."

Amazon has been around since 1997. Its Kindle-branded tablet efforts long predated the iPad, having been introduced in late 2007. But its two year lead in tablet-sized mobile devices, followed by three years of direct competition with the iPad, haven't come anywhere close to matching Apple's performance in mobile hardware. Amazon won't report how many Kindles have sold, but its tablet business isn't resulting in Apple-style profits.

Money from content?

Amazon embarked upon an effort to undercut Apple's iTunes song sales with its own discounted MP3 store in late 2007. Five years later, Amazon still has a relatively small music business limited to nine countries, compared to Apple's world leading online music store now available in 119 countries.

Two years ago, Amazon fractured Google's Amazon tablet platform to introduce a rival to Apple's iOS App Store with the same branding, in order to sell software content to a series of Android-based devices. However, it has not been able to consistently turn a profit doing so. Amazon operates in six countries; Apple's App Store is available in 155.

Apple reported $2.1 billion in revenues from iTunes in the winter quarter, but the company has regularly described its iTunes-related online services as designed to operate as an enhancement to its hardware business, without needing to turning a significant profit. Amazon isn't turning a significant profit on content sales either, but it's also not profiting from hardware.

That calls into question the widely held hope that advertising and content sales will be able to fund competitive efforts to develop mobile products to rival the iPod, iPhone and iPad, whether those efforts involve Android or not.

Amazon is scheduled to report its winter quarter results Tuesday January 29.
«13

Comments

  • Reply 1 of 42
    majjomajjo Posts: 574member
    [Quote]Two years ago, Amazon fractured Google's Amazon tablet platform[/quote]

    Lol.

    Seriously though, what was the point of this article?
  • Reply 2 of 42
    solipsismxsolipsismx Posts: 19,566member
    majjo wrote: »
    Seriously though, what was the point of this article?

    I suppose to show a disparity in how the companies are viewed. Apple makes record profits and has about a 10% net profit growth average per day compared to the same quarter the previous year and yet it's deemed a failure but all Amazon has to do is actually be in the black this quarter to win. Apple makes more profit on iTunes Store with a goal of trying to break even than Amazon makes for their entire business but that doesn't seem to matter. That's quite an imbalance.
  • Reply 3 of 42
    thank-you Daniel & Mark. Big Amazon user since 97, great company...but ponzi economics/valuations
  • Reply 4 of 42
    quinneyquinney Posts: 2,523member
    A person can only take so much cognitive dissonance.
  • Reply 5 of 42
    Consider this - Jeff Bezos is reported to have a net worth of $25B. That is twice as much as the height of Steve Jobs's net worth, even after he sold Pixar. That just highlights the contrast between how the two companies are perceived.
  • Reply 6 of 42
    stelligentstelligent Posts: 2,680member

    Quote:

    Originally Posted by ankleskater View Post



    Consider this - Jeff Bezos is reported to have a net worth of $25B. That is twice as much as the height of Steve Jobs's net worth, even after he sold Pixar. That just highlights the contrast between how the two companies are perceived.




    Is that true? That is indeed upside down.

  • Reply 7 of 42
    apple ][apple ][ Posts: 8,360member

    Quote:

    Originally Posted by SolipsismX View Post





    I suppose to show a disparity in how the companies are viewed. Apple makes record profits and has about a 10% net profit growth average per day compared to the same quarter the previous year and yet it's deemed a failure but all Amazon has to do is actually be in the black this quarter to win. Apple makes more profit on iTunes Store with a goal of trying to break even than Amazon makes for their entire business but that doesn't seem to matter. That's quite an imbalance.


    They don't even have to be in the black. Heck, they lost hundreds of millions last quarter, but yet, the stock keeps rising.


     


    With the current evaluation, all of the investors will be long dead before it ever reaches the ridiculous evaluation that's assigned to it.


     


    This is from Dec. 2012


     


     


    Apple's earnings were up and the stock went down. Amazon reported a quarterly loss and the stock went up.


    The result is a pair of PE ratios too far apart to show on a linear graph. Amazon's twelve-month trailing PE is 2,766.93. Apple's is 13.06.


    Because PE is a measure of earnings over time, you can think of it as representing the number of years required to pay back a stock's purchase price (ignoring inflation, earnings growth and the time value of money).


    Put another way, if it takes Apple 13 years to pay back your initial investment, it will take Amazon nearly three millennia.


    http://tech.fortune.cnn.com/2012/11/03/amazons-price-to-earnings-ratio-is-now-2767-apples-is-13/


     


    And since Apple made far too much money this past quarter, and Wall Street seems to have a hard on for losers and companies who lose money, their P/E is probably even much lower now.


     

  • Reply 8 of 42
    solipsismxsolipsismx Posts: 19,566member
    Consider this - Jeff Bezos is reported to have a net worth of $25B. That is twice as much as the height of Steve Jobs's net worth, even after he sold Pixar. That just highlights the contrast between how the two companies are perceived.

    Good and interesting point. Note that it's actually connected but has Amazon even made $25 billion in earnings since its inception? Apple will make that in just under two consecutive quarters.
  • Reply 9 of 42
    solipsismxsolipsismx Posts: 19,566member
    "Apple wrote:
    [" url="/t/155623/apples-record-profits-contrasted-with-amazons-hopes-to-turn-a-profit#post_2264322"][...]

    The result is a pair of PE ratios too far apart to show on a linear graph. Amazon's twelve-month trailing PE is 2,766.93. Apple's is 13.06.

    [...]

    Put another way, if it takes Apple 13 years to pay back your initial investment, it will take Amazon nearly three millennia.

    [...]

    Note that as of closing today Amazon's P/E is 3,657.04.
  • Reply 10 of 42
    apple ][apple ][ Posts: 8,360member

    Quote:

    Originally Posted by SolipsismX View Post





    Good and interesting point. Note that it's actually connected but has Amazon even made $25 billion in earnings since its inception? Apple will make that in just under two consecutive quarters.


    Unless I'm reading it wrong, Amazon has only reported 5 billion in earnings, and that spans their entire existence.

  • Reply 11 of 42

    Quote:

    Originally Posted by SolipsismX View Post





    Note that as of closing today Amazon's P/E is 3,657.04.


     


    Anyone who uses the argument that on a forward looking basis Amazon has the potential for greater profits than Apple should have their head examined.

  • Reply 12 of 42
    solipsismxsolipsismx Posts: 19,566member
    Anyone who uses the argument that on a forward looking basis Amazon has the potential for greater profits than Apple should have their head examined.

    I think you assume to much. First I'd check to see if one has an attached head at all and if it's stuck up one's ass. ;)
  • Reply 13 of 42

    Quote:

    Originally Posted by Apple ][ View Post


    Unless I'm reading it wrong, Amazon has only reported 5 billion in earnings, and that spans their entire existence.



     


    You are reading it correctly!  Last year was the first year that Amazon made money since it was founded!   

  • Reply 14 of 42
    Patience, people, patience. It's like karma. It eventually -- measured in months and years, not lifetimes -- catches up with you. Markets do not stay foolish forever.

    What's the hurry, unless you need your wealth right now?
  • Reply 15 of 42
    jragostajragosta Posts: 10,473member


    Originally Posted by "Apple ]["

    They don't even have to be in the black. Heck, they lost hundreds of millions last quarter, but yet, the stock keeps rising.



    With the current evaluation, all of the investors will be long dead before it ever reaches the ridiculous evaluation that's assigned to it.



    This is from Dec. 2012

    Apple's earnings were up and the stock went down. Amazon reported a quarterly loss and the stock went up.

    The result is a pair of PE ratios too far apart to show on a linear graph. Amazon's twelve-month trailing PE is 2,766.93. Apple's is 13.06. 


    Because PE is a measure of earnings over time, you can think of it as representing the number of years required to pay back a stock's purchase price (ignoring inflation, earnings growth and the time value of money). Put another way, if it takes Apple 13 years to pay back your initial investment, it will take Amazon nearly three millennia.


    http://tech.fortune.cnn.com/2012/11/03/amazons-price-to-earnings-ratio-is-now-2767-apples-is-13/

    And since Apple made far too much money this past quarter, and Wall Street seems to have a hard on for losers and companies who lose money, their P/E is probably even much lower now.


     


    Actually, you not only have to adjust Apple's P/E for the drop in share price, but also it is not uncommon to remove the cash from the calculation. Apple's forward, cash adjusted P/E is around 7. IOW, investors are saying that if Apple's profits don't grow at all, Amazon only has to increase its profits by 50,000% to reach the same P/E.



    Absolutely insane.

  • Reply 16 of 42

    Quote:

    Originally Posted by buckalec View Post



    thank-you Daniel & Mark. Big Amazon user since 97, great company...but ponzi economics/valuations


    I usually buy my music from iTunes but this Christmas I was able to buy over 500 songs (not Christmas music) for around $16 on Amazon. That included 16 top albums of 2012. It wasn't as easy as iTunes, but it wasn't that hard either. I'm not even an Amazon "Plus" (or whatever it's called) member.

  • Reply 17 of 42

    Quote:

    Originally Posted by Macky the Macky View Post


    I usually buy my music from iTunes but this Christmas I was able to buy over 500 songs (not Christmas music) for around $16 on Amazon. That included 16 top albums of 2012. It wasn't as easy as iTunes, but it wasn't that hard either. I'm not even an Amazon "Plus" (or whatever it's called) member.



    Really? How did you do that?  

  • Reply 18 of 42
    alfiejralfiejr Posts: 1,524member


    another great example of current bizarre market and tech web nonsense is comparing today's MS quarterly report with yesterday's Apple report.


     


    Apple reports YOY slight gain in profit on large gain is sales, and the response is: Doom! with 12% one day drop in stock price. Apple P/E now at 10.2. websites foam at the mouth over Apple's "problems," never mind its accurately reporting big sales of new products.


     


    MS reports YOY slight dip in profit on slight drop in sales, and the response is: Good! with stock price unchanged. MS P/E now 14.9. websites barf fawning assurances that MS is ok (because it shipped 60 million W8 licenses at launch period 35%-75% off discount prices), never mind refusing to say how many Surface RT's were sold (a total flop).


     


    so, ok, let's suppose Apple is no longer a "growth" stock beloved by speculators and is now merely an investment stock like MS has been for some years. so if the MS P/E is an acceptable valuation for an investment stock, then Apple stock should be at $657 today, not $450.


     


    what we have here folks is an outbreak of mass hysteric idiocy. you didn't know you could catch that shit through the web, did ya?

  • Reply 19 of 42
    flaneurflaneur Posts: 4,506member
    alfiejr wrote: »

    what we have here folks is an outbreak of mass hysteric idiocy.

    Thank you. I believe this is a newly named disease of our tiime. Yes it is Internet and media based.

    It afflicts the high and the low, WSJ and Forbes and Marketplace and NPR, all turned into lunatics.

    Gruber's Question of the Age refers to it: "What exactly is it about Apple that causes people to lose their minds?"

    http://daringfireball.net/linked/2012/10/01/cohan-jackass

    I know of only one comparable historical period when mass hysteric idiocy held sway: the Weimar Republic in Germany in the 20s and early 30s.

    Ominous, but if we find the cause maybe we can find the cure.
  • Reply 20 of 42
    jragostajragosta Posts: 10,473member
    flaneur wrote: »
    Gruber's Question of the Age refers to it: "What exactly is it about Apple that causes people to lose their minds?"

    http://daringfireball.net/linked/2012/10/01/cohan-jackass

    Exactly. The reports about Apple are so incredibly biased that it's incredible. You'd think that they were on the brink of bankruptcy from reading what most of the media is saying about them instead of being the most profitable company on the planet - and still growing.
Sign In or Register to comment.