Amazon Profits Fall 45 Percent, Still the Most Amazing Company in the World

Thanks, Slate, for regurgitating what you heard a friend mention in a coffee shop and looking on Google Finance for a few numbers to fill in.<p>The first lines from the Argus report show:<p>"...management's emphasis on keeping prices low and heavy infrastructure investments...Most of the weakness appears to be in the International division, as the company expands operations in economically weak markets such as Europe and China."<p>(If you want to read Argus reports, many stock trading sites will give you free access after opening an account.)<p>Edit: not sure why I'm being downvoted; afterall, I'm responding to an Article which has this line: "That's because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers"

Just to give some numbers to this, for anyone wondering:<p>In 2012, Amazon made $631 million profit on over $48 billion revenue - meaning they converted a little over 1% into profit. Meanwhile, almost every other comparable company had close to 20x that. Google made about $11 billion on $48 billion, and Apple made $41 billion on $156 billion. From a purely financial perspective, it really is insane.

Keep in mind that eCommerce is only ~15% of all commerce in the USA. If we will be buying all the things we want/need online in the future, someone will be the Wal-Mart.<p>The market and many believe that Amazon will be that company because they are using all of their revenue now to aggressively ensure this.<p><a href="http://kpcb.com/insights/2012-internet-trends" rel="nofollow">http://kpcb.com/insights/2012-internet-trends</a>

Amazon started in one business and is slowly dominating another one. They're revolutionizing cloud computing using the infrastructure that allows them to dominate the online shopping market.<p>I would say Amazon has two healthy futures as a company. Neither future looks ready to be unseated, given the shopping/cloud landscape in Q1 2013.

I view Amazon like I view Square - the value doesn't come just from the profit, but from their market dominance. Square is raising so much funding without reaching a break-even point because international dominance in finance is a highly lucrative position to be in. Likewise, Amazon is still making money - just not much compared to the amount of merchandise they sell. The value comes from the concept - Amazon is redoing supply chain, and with same-day deliveries coming to the USA soon, the value is in Amazon gaining marketshare such that they both increase sales and increase margins.

Here's what I don't get. Amazon seems to be all about growth; in fact, their stock price is so high that its investors seem to believe that Amazon intends to expand enormously internationally and that it will crush all of its competitors when it does.<p>However, to this casual observer it seems they haven't made grounds in new markets in ages. And they're not at all a raging success in all of the markets that they have entered.<p>I'll give two examples.<p>China. They absolutely botched this. Chinese people just don't shop there. Worryingly, Amazon doesn't seem to know how to react. E.g. some time ago they started using this new Z.cn branding, but now they're just inconsistently using both the Amazon.cn and Z.cn names. (And of course they have a Chinese name also.)<p>Europe. For some reason they have three different stores in Europe. Two of those are in France and Germany. These stores charge in euro, which would be convenient for other Europeans except that these stores don't have English language front-ends. As such they only serve a limited market. The third store is located in the UK. It charges in pounds, which makes it a hassle to shop there. Moreover, they have weird restrictions on what they will and will not ship internationally and you have to pay by credit card—which relatively few Europeans have.<p>I recently read that Amazon is going to launch Amazon.nl in the near future. I've been hearing those stories for ages now, though, so I don't know if it's true. But suppose they did. Is it really a given that they will do well? In the many years that Amazon didn't open a Dutch store, tons of web stores have sprung up, and some of these have gained significant mindshare. I reckon it will be very costly and time consuming for Amazon to beat these competitors. Why is it that investors don't seem to be worried about this?

Companies investing in themselves? Disgusting behavior.

<i>"There is only one valid definition of business purpose: to create a customer"</i> - Peter Drucker's <i>The Practice of Management</i>[1]<p>Let's take shareholders (both internal/external) out of the equation for a second... What do profits really actually do for companies? You take those profits, reinvest them to create even more customers. Amazon does that, and very aggressively, and for about 18 years and counting.<p>[1] - <a href="http://www.amazon.com/gp/product/0060878975/ref=as_li_ss_tl?ie=UTF8&#38;camp=1789&#38;creative=390957&#38;creativeASIN=0060878975&#38;linkCode=as2&#38;tag=whitneyhess-20" rel="nofollow">http://www.amazon.com/gp/product/0060878975/ref=as_li_ss_tl?...</a>

Amazon will never make a real profit, for two reasons:<p>a) Amazon is in a fundamentally shitty business: retail. It's retail on the Internet, but still retail. Amazon may successfully get into a real tech business, but they've been fairly unsuccessful at this so far--and there strategy continues to be to compete on price (AWS, Kindle etc.) which means no profits.<p>The real reason, though is:<p>b) Bezos is so focused on the long term that all profits will be immediately reinvested. Amazon is an ego thing for him and he wants it as big as possible at the limit. So Amazon will continue to grow but never make a profit. It's value is forever unmonetizable, even as it continues to own more physical stuff (warehouses, etc.).

Just proof to me how screwed up Wall St is. Apple makes a profit and sells a record number of iPhones and iPads and its stock gets hammered whereas Amazon loses an amazing 45 percent and gets a slap on the wrist from Wall Street.

Didn't we just have a whole thread on how Amazon is not even trying to make a profit, but rather run razor thing margins to prevent any competition with less efficient methods?