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Amazon Spoils The Party

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Amazon.comI don't know, maybe it's poetic justice or just karma that Amazon should report disappointing results tonight with earnings well below estimates. Why? After I was labeled a cheater and was terminated from the Amazon Associates program, I had hoped for a little payback. I certainly did my part by vowing never to buy anything from Amazon and as much as I dislike Apple, rooting for iPad to crush Kindle.

Okay, enough vendetta venom. The fact is that Amazon does not have it as easy as it once did. Its marketplace is still solid, but poor economy and competition from the likes of eBay have been eroding its dominant position. Amazon's valuation is currently twice that of eBay.

Then, by Amazon's own admission, more people are buying digital editions rather than actual books. How can this be good news for Amazon? Such a shift to digital format lowers the barrier to entry for other competitors who would no longer need warehouses and shipping centers. Apple can start selling books for iPad right on the iTunes platform.

Finally, cloud computing hasn't turned out to be the golden goose it was once thought to be. Amazon certainly was a pioneer in cloud computing, but the early momentum has somewhat moderated now and competition from Microsoft and Google (which offers a free version) have probably had a dampening effect on Amazon platform's adoption rate.

Amazon shares are currently down some 10% in after-hours trading and it appears that its disappointing financial results will have a nauseating effect on the market on Friday. Even Microsoft's better-than-expected results may not be able to change that sour mood.

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