Wall Street’s patience with Amazon’s losses wears thin

“Amazon.com Inc. shareholders have been extremely patient with the company’s investment strategy,” Therese Poletti reports for MarketWatch. “But after the Internet e-commerce giant reported a wide-than-expected second quarter loss last week, Wall Street’s patience began to fray.”

“Amazon reported weaker revenue in its cloud computing business, after it cut prices during the quarter. Many of the questions on its conference call with analysts revolved around Amazon Web Services, or AWS, and the growth slowdown. The price cuts were a response to growing competition in the cloud computing area,” Poletti reports. “Amazon’s high-flying shares fell more than 10% after its results and shed more ground in trading on Monday. Several brokerage firms have cut earnings estimates or lowered their ratings on the stock. ‘Investors are less patent than before regarding ongoing margin pressure,’ Canaccord Genuity analyst Michael Graham said in a note late last week.”

Jeff Bezos

“Indeed, some investors are starting to wonder if Amazon, by trying to be all things to everyone on the Internet, is starting to do too much. From its work on delivery drones to streaming video devices to its new smartphone, Amazon has its fingers in all kinds of pies,” Poletti reports. “Amazon shareholders will have to ask themselves whether Amazon is trying to do too much at their expense.”

Read more in the full article here.

MacDailyNews Take: No mercy for the munchkin.

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43 Comments

  1. One of the best “lessons” from Steve Jobs and Apple is FOCUS! No company can be all things to everyone. Figure out what you are good at or WANT to be good at and focus on that do not be distracted. Anyone can be OK at something it take focus and determination to be Great. Amazon needs to focus on its Online sales business and get out of all the crap – a Phone – Really? E- Readers? Focus Amazon F-O-C-U-S.

    1. I think they are in fact focused, very focused. They are focused on distracting everyone from their failed retail strategy that simply isn’t providing the return on investment that it should. Their retail strategy is to beat down vendors pricing.

      Great example, HR Block Tax software I buy every year. Why on earth do they sell it at a lower price on Amazon than H&R Block charges on their own web site? How stupid is that?

      1. Chaz…think much? You do realize that many vendors don’t want to be the ones that store all of the inventory or deal with shipping. That’s why many times, you’ll see prices cheaper on Amazon, Newegg, CDW, etc. etc. than on the vendors sites. They’d rather have someone else deal with logistics, sell to retailers, and get guaranteed money that way. Yikes…

        1. H&R Block is tax software, downloaded, no fuss no muss. I’ve seen this countless times where companies sell through Amazon at prices significantly below what are asked on their own web sites. If you note, Apple is very careful about letting sub vendors excessively discount their wares. That’s how you manage not having your goods show up in the discount bin beside the brown zune’s. Shocking that other companies don’t understand this.

      2. Actually it is standard business practice, as a rule, for product manufacturers to sell on their own website at “list price”. It is an unwritten rule that they should not undercut their authorized distributors. Yes, Amazon has devised all kinds of methods, including some pretty sleazy practices, to pit one vendor against one another, many of which are selling gray-market merchandise. Some, in my opinion, are bordering on unethical. Just anyone who sells a lot on Amazon. If you are selling a popular product, it WILL get bloody.

        1. There are a lot of Amazon business partners hurting, a sign of Bezos’s desperation to finally make his ill conceived grand plan pay off. Investors’ faith in this snake oil salesman long ago crossed into the insane. How else can you explain a P/E of 800, even now?

    2. They’re not trying to be all-things-to-all-people. They’re trying to lock up their business, which is books, products and quick delivery.

      Books went digital, so they went to digital devices.

      Products are being sold more cheaply than they once were, with local benefits like service and quick returns, so Amazon is seeking to compete by using tech to make the process even easier (firefly).

      They’re getting killed on the cost of shipping so they’re building warehouses all over the US to make quick shipping cheaper. Drones are a part of this exploration.

      Amazon isn’t making self-driving cars. Neither a twitter competitor. They’re looking forward and trying to get a jump on where the pucks are heading.

      Investors are balking not because it’s too much, but because they’re not convinced it’ll work. And that damns the whole system. I.e., if Amazon is incapable of skating to where the puck is going then they don’t own the future and will slowly regress, shrink, and perhaps ultimately fail spectacularly and entirely.

      It’s that doubt that has their stock down. It’s not down that much, but investors are watching. Amazon needs some quick successes. I’m not convinced they’re coming.

  2. Amazon could be profitable tomorrow if it decided – or were pressured – to be. Right now being profitable is not a priority because Amazon is focusing on growth and its ecosystem, something that Bezos has long made known to its investors.

    And no, this is not because Amazon is trying to compete with Apple in selling tablets and smartphones (and truthfully Amazon is not really trying to compete with Apple but rather hawking items to their own Prime customers). That is only a fraction of Amazon’s costs and business. So, the only real worry that Amazon has right now is that Microsoft’s Azure – you know the company that all of you Apple fans keep insisting is all but dead, has no future and that IBM is going to crush in the enterprise and services by creating iPad apps – and Google’s cloud platform (you know, the company that Apple fans believe that Android is all they do) is taking away a big chunk of their AWS business. It is a real concern, because Amazon had a huge head start in that area – as a matter of fact they pretty much invented that business – and Microsoft came along years later after Amazon AND Google and was able to become a major player capable of taking away market share very fast.

    But other than that, Amazon has very little to worry about.

    1. The kindle is a great tool for Amazon to push content and was worth the investment (and is still the best reader around), but I think the phone is a complete waste and can’t see what compelling feature would make a consumer pick an Amazon phone.

    2. I admire your confidence.
      But where are those profits to be found? Easy you say, raise prices…but then what is the point of using Amazon if you remove their one true differentiating advantage?
      First Amazon…Google next in line for readjustment?

    3. Growth and profits are not mutually exclusive. Look at Apple they have achieved both by being smart and focused.
      Market share is a big distraction that companies should avoid putting a priority on.
      Amazon has a great online service and that area is likely profitable. The kindle is also a good device. Their phones and tablets will likely fail because they do not have the level of understanding how to make a product good. Therefore it will just be a cheap device which works poorly.

      1. “Growth and profits are not mutually exclusive. Look at Apple they have achieved both by being smart and focused.”

        Yeah, like comparing Apple to Amazon is apples to apples. Get this through your head. Tablets. And. Smartphones. Are. Only. A. Tiny. Part. Of. Amazon’s. Business. Amazon could end the very tiny portion of their business where they compete with Apple tomorrow and it wouldn’t make a bit of difference to their bottom line either way. So your “market share versus margin” rhetoric that you guys used for decades against the Microsoft PC makers and ported to the Android makers doesn’t cut it here. Amazon’s competitor isn’t Apple. It is Target and Wal-Mart. Go tell ANY retailer that market share doesn’t matter. Even Macy’s was forced to stop being a high-end retailer selling mostly luxury goods to being just another department store to stay in business.

        “Their phones and tablets will likely fail because they do not have the level of understanding how to make a product good. Therefore it will just be a cheap device which works poorly.”

        Apple fans say this about the competitors to every product that Apple makes. Including companies that were making those products before Apple entered the business. So when Apple starts making watches, I fully expect Apple fans to start claiming that Timex, Casio, Rolex etc. has no idea how to make watches, should just exit the watch business and instead start making parts and accessories for the iWatch. The truth is that every reputable source regards the Kindle Fire HDX and the Kindle Fire HD to be very good products that have no performance or functionality issues. And the Kindle Fire TV is a much better device than the Apple TV, down to having a much superior processor. It is merely that its superior hardware is held back by Amazon’s inferior apps (far inferior even to the Google, Samsung and Xiaomi stores, let alone the Apple store) and utter lack of an ecosystem.

        1. This is getting scary:

          I fully expect Apple fans to start claiming that Timex, Casio, Rolex etc. has no idea how to make watches, should just exit the watch business and instead start making parts and accessories for the iWatch. The truth is that every reputable source regards the Kindle Fire HDX and the Kindle Fire HD to be very good products that have no performance or functionality issues. . .

          Just slip your arms into the warm long sleeved jacket the nice men in the white coats are holding. They won’t hurt you. They just want to fill your arm with thorazine and Every. Thing. Will. Be. Just. Fine. (O_o)

    4. Thank you for giving voice to your own bias by addressing the readers here: “…you know the company that all of you Apple fans keep insisting is all but dead,…”

      This past Friday I ordered two items via Amazon. Together the items totaled US$22 and even though I am a Prime customer, there was a $4.98 charge for shipping and handling. One of the items was delivered… SUNDAY! Given where I live, the driver consumed at least a gallon of gas ($3.84/gallon near me) delivering this small little box.

      This is not the practice of a well-run business that can be profitable whenever it chooses to.

    5. Um, huh?

      …and Google’s cloud platform (you know, the company that Apple fans believe that Android is all they do)…. their AWS business. It is a real concern, because Amazon had a huge head start in that area – as a matter of fact they pretty much invented that business…. and Microsoft came along years later after Amazon AND Google and was able to become a major player capable of taking away market share very fast.

      WTF alternative reality is this guy from? That’s all I can say. 🙄

    6. @ atlman

      you have NO FACTS supporting your theories like
      “Amazon could be profitable tomorrow if it decided”

      My take is if Amazon cut prices it’s competitors will eat it’s lunch tomorrow. My FACTS are for example in Canada, Chapters Indigo (canada’s biggest book seller) MATCHES AMAZON’S BOOK PRICES AND SHIPPING and gives extras like purchase points and the choice for certain books (like Canadian books) is LARGER. (i.e if Amazon ever cut prices to become “profitable tomorrow” it’s Canadian book business is gone.).

      Bezos did NOT go into tech like Kindles or Distribution Centres because it’s cool or brilliant but BECAUSE COMPETITION IS KILLING IT.
      E books would eventually kill it’s paper book business so it was FORCED to go into tech like Kindles. You can see it is NOT equipped to build tech as the GIANT tech failure of a FIre Phone shows (as tech is big, it takes billions of $ and years investment. Apple which make billions in profit every quarter has thousands of engineers and Apple has been laser focused working on OS and hardware for 30 years. ) Likewise Amazon is FORCED to go into many distribution centres as shipping costs is killing it.

      Amazon investors actually KNOW NOTHING, you can’t tell me how much it’s components like cloud computing is actually making, how many Kindles or Fire phones sold, you can’t even tell how many Prime customers it has because Amazon does NOT RELEASE CRUCIAL NUMBERS. (ask yourself if it was good numbers why doesn’t it release them? Every quarter Apple tells EXACTLY how many iPhones, macs are sold , even usually how many are in channel etc. )
      Amazon investors are just GUESSING and GAMBLING and LIVING ON BLIND FAITH swallowing the words of the biggest huckster of the generation Bezos.

      BUT…

      BEZOS IS SMART.
      he’s not making making money off Amazon but Amazon STOCK with it’s P.e of 800 vs Apple’s of 16 as more Ponzi player investors pile in while he SPINS and SPINS…
      Bezos real business seems to be manipulating the stock, my hats off to him for his brilliance (P.e of 800.. !!! ! ) …

  3. It’s about time.

    Going forward, Amazon as a stock will also now face competition as an investment option. If you want to invest in an internet marketplace, would you invest in Amazon with virtually no profits or Alibaba which made $2.8 billion in profit in the last 9 months on $5.6 billion in sales?

    Very difficult for Bezos to justify the continued “investment” and lack of profits when Alibaba can make 50% margins on much lower sales in the same business model.

  4. I doubt Bezos gives a ratsarse wether Amazon makes a profit or not. He makes shit-loads as do his buddies (exec team).

    They have made billions running the biggest scam in history. Bullying publishers, making tablets that are pretty well useless for anything but buying stuff from Amazon, dodgey dealings with the UsS DOJ, sweatshop warehouses etc etc.

    Capitalism at its worst and most destructive. Fortunately such behaviour can’t last, sooner or later (hopefully sooner) Amazon will self destruct and Bezos and mates will bugger off to wallow in their kazillions of bucks.

    1. Bitter much? You seem the type that only wants to see negativity in capitalism. Rich people suck, etc. If you don’t like their sucky phone, don’t buy it. I wouldn’t invest in a stock with a P/E of 500 and no profits, but as an Amazon customer, I think it’s capitalism at its best, advancing a new marketplace paradigm that is enormously useful. There is destruction, and there is creative destruction http://en.wikipedia.org/wiki/Creative_destruction

      1. EXCELLENT insight!

        Isn’t it astounding how adaptable business is to the concept of destroying the economic system that allows it to flourish? Jump right on that landmine! Well done biznizz.

        Who will be the last to survive, standing atop their burning heap of rubble? “Me Me Me!” says Bozo Bezos. “I’m on Fire!”

  5. Amazon got away with the ebook B.S. with the DOJ and that puppet judge Coyote on there side for whatever reason. But I hope when Apple gets to the appeals things will change. And Amazon is helping that with the news about how they are treating publishers by not selling there products or delaying shipping until Amazon gets the price they want. Talk about monopoly type business practices, there’s one right at the top! Boycott Amazon!

  6. BUYING MARKETSHARE

    That’s what Amazon is all about. And what is the result? Killing competition and diversity in the marketplace. Monopolization.

    So bravo Wallnut Street for continuing to invest in destroying capitalism. You’re so smart! 😳

      1. diversity and competition are what it is supposed to be based on. but it pretty much encourages and practices just the opposite thanks to the big monied interests who can afford to buy influence in washington the d.c.

        i am not at all anticapital, but unless capitalism is conducted, and to a degree regulated, so that the benefits also flow to the betterment of the broader society, it will not retain our loyalty.

        the profit motive is inherent to capitalism, nobody goes into business to go out of business, but if maximizing profits to the detriment of your employees, or suppliers, or society at large is the business plan, then you are killing the goose that lays the golden egg: the people and eventually the nation.

        henry ford figured it out long ago, essentially ” i will pay my people a wage that allows them to afford my products”

    1. You were clearly not a business major. The goal of EVERY business is to kill their competition and have a monopoly.

      Wall street is also not the anti-trust police. Everyone on wall street is trying to identify the next monopoly and invest in it before others do. You sell short the companies that they are going to kill.

      Wall street also does not exist to support capitalism. It only exists as a means to make money. No more, no less.

      Our political system is supposed to function to support capitalism if that is what we as a society decide is what we want as an economic system.

      1. You’re clearly a student from one of the shite contemporary business schools. You’ve bought into the blatantly self-destructive bad attitude these shite schools teach and excrete into the biznizz world as ‘Masters of Business Administration’. I’ve been babbling on about the WORTHLESS biznizz schools in the USA for at least a decade. You’re a GREAT example. Very sad. Very self-destructive. The 2007 second great depression was a prime example of just how intelligent your acquired sick thought process really is: Kill capitalism! You wish is being granted, poor lost biznizz bozo. We’re already in the thick of it. Build the funeral pyre.

        Another Wallnut Street brain casualty.

        THIS is one of many reasons I champion Apple. They aren’t of this sickly ilk.

        1. ya think critic2 is a troll or something? just trying to stir the pot and see what floats to the top ?

          it is hard to imagine a sentient being holding and espousing such a precambrian attitude.

          tain’t healthy, for him or any of the rest of us.

          maybe mr. peabody and his boy sherman can stop by with their time machine and whisk him back to late 19th century america. he might like it there… unless of course he didn’t get to go back as andrew carnegie, but instead got to be one of mr. carnegies steel workers.

          it is a very destructive perspective

          1. Hell yeah it’s destructive. I’m constantly flummoxed by what I call the ‘Human Self-Destructive Imperative’. Certain people live their entire lives completely clueless to the fact that they’ve been stabbing themselves in the head every day. It creeps me out.

            One common symptom: Short-term thinking, long-term disaster.

        2. Fully agree. Where does this crap of killing your competition come from? These companies are run by idiots who chase market share not profit share. They claim success based on how much of the market they control, not the profit share they control. They lust after all customers, not the ones who matter. (insert walmart here) They are measuring themselves as big vs small. Look at Apple, BMW, Nordstroms, etc, they are successful but share of total market is not how they run their business.

          Hmm, amazon growing big but managed by very little man.

  7. Amazon is awesome. They making finding and ordering products a breeze. Maybe they should be a nonprofit company then they aren’t making money anyways.
    Oh and it fell 10% that’s nothing. 10% is not a big fall.

    Disclosure I don’t own amazon

  8. Google also dumps tons of money trying every crazy scheme they can imagine. The difference is that, despite all of that, they still make money. Wall Street’s fine with your company behaving like a 5-year-old with ADHD as long as you still deliver profits.

    ——RM

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