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Amazon's Gross Margin

by @ 4:05 pm
Filed under: business,financial,web — Tags: , ,

Much has been said about how Amazon's high stock price is unjustified. This morning my boss sent me a link that reminded me again how ridiculous Amazon's share price has gotten as of late. The article summed it up well by noting that if Apple were to have the same PE ratio as Amazon, its share price would be $145,000.

I suppose another way to even better demonstrate this insanity is to use the same equation on Berkshire Hathaway class A shares, which would send them to an astronomical $31 million/share.

My boss tried to justify Amazon's stock price by mentioning their high profit margins. So I decided to take a look at what Amazon's gross margins are and how they compare with some other companies. Here's a short list:

  • Amazon: 25%
  • Apple: 39%
  • Google: 57%
  • eBay: 69%
  • Microsoft: 74%
  • Intel: 63%
  • Priceline: 82%
  • Wal-Mart: 25%
  • Ford: 18%
  • Oracle: 80%
  • GE: 26%

As you can see Amazon's gross margin is way below its peers, but in line with that of Wal-Mart's. Proof that Amazon is nothing more than a glorified, high-tech super store.

As to why its stock continues to rise despite any rational justification, another person said it well. Traders play Amazon as a momentum stock and it has become a self-fulfilling prophecy. Logic indicates that it should come down crashing hard, but this stock escaped logic long ago and it'll be foolhardy to bet against it now.

Facebook IPO Price Clamp

by @ 12:53 pm
Filed under: financial — Tags: , ,

Seems like everything was on hold yesterday except for the Facebook stock price gyrations. In the end it eked out a measly 23 cents over its IPO price of $38 and that with some grand assistance from its underwriters and backers.

That assistance was so obvious, specially towards the end of the trading session. You could tell the stock really wanted to break below $38, but every time it touched that price it was nudged back up. Looked totally artificial and trigger-directed. Obviously the bankers didn't want to look foolish by having the stock close below IPO's price. That would have meant that they didn't do their homework. At least this way they can claim they priced it in the Goldilocks zone, not too hot, not too cold, but just right.

Well, the founder and a bunch of other people that matter became uber-wealthy yesterday and there's still a chance that the stock may get its footing and actually climb. Sure, it's an expensive stock with the P/E ratio currently at 122, but Amazon's P/E is an astounding 175. Going by Amazon's measure, Facebook should at least be worth $55 per share.

Amazon's Ridiculous P/E

by @ 11:09 pm
Filed under: financial,web — Tags:

Yeah I know, P/E ratio is so old school but as I read the post below I was blown away by how ridiculous Amazon's P/E ratio of 184 actually is.

For a quick verification I went down a list of stocks I follow and none even came close to that figure. Even Priceline with its unbridled share price growth, has a P/E of 34. The rest of them average somewhere in the teens.

Granted, Amazon is the number 1 online retailer, sells a nifty reader and a tablet, is a cloud computing pioneer, and is trying to break into the high fashion market, but 184?

Maybe if it were a startup with expectations of explosive growth in a year or two, that figure could be justified. But Amazon, at nearly 20 years old, is hardly a new kid on the block.

How is AMZN worth 13 AAPLs? - Apple 2.0 - Fortune Tech

Amazon, Target, and Showrooming

by @ 10:47 pm
Filed under: financial,internet,law — Tags: , ,

Last week came the news that Target stores will no longer carry Amazon's Kindle readers. The bold move was basically a retaliatory reaction by Target to what is known as showrooming.

Showrooming is how Amazon encourages its users to visit various physical stores, check out or even try out various merchandize and then go back to Amazon to order them for cheaper prices. In a sense Amazon uses the physical stores as showrooms for free and that creates an unfair advantage in favor of Amazon.

Sure, people can visit Amazon's site too to shop around but a page visit costs Amazon a tiny fraction of a penny while a shopper roaming the isles of a store, and specially inspecting and trying various items could cost the stores multiple dollars.

Target may feel good about removing Kindles from its shelves but that maneuver will be but a blip on Amazon's bottom line. Making the playing field fair will be tall order but for starters Amazon should be required to collect sales taxes on all items sold. If there's heavy resistance, then stores should be exempt from collecting sales taxes as Amazon is.

Paying sales taxes on Amazon purchases will not be popular, but if Amazon is allowed to push physical stores out of business through the unfair loopholes, that will result in a monopoly and there's little doubt that its pricing policy will not favorable by any measure once the competition is wiped out.

Amazon, a 'Predator'

by @ 4:28 pm
Filed under: business — Tags:

Kudos to this publisher for having the courage and vision to remove its titles from Amazon.com.  This is what the CEO of the publishing company said of Amazon:

Amazon is squeezing everyone out of business. I don’t like that. They’re a predator. We’re better off without them.

Google's mantra of "don't be evil" should really be "don't be like Amazon". It cheats its affiliates, it dodges taxes, it's anti-competitive, it abuses publishers, and it does all that with the attitude of hubris and entitlement.

Amazon wants us to believe that it's all about "out with the old and in with the new." Nice try, it's more like "out with competition and in with monopoly."

Amazon’s E-Book Pricing a Constant Thorn for Publishers - NYTimes.com.

Disclaimer: I have disliked Amazon for some time.

Amazon's Tricky App

by @ 9:23 pm
Filed under: business,web — Tags: ,

It doesn't seem to be breaking any laws but it's certainly unfair and anti-competitive. This time Amazon is asking its customers to use its Price Check shopping app on products in retail stores and then turn around and buy the same items from Amazon and receive perks in the forms of discounts and credits. Of course people have the right to shop wherever they want, but asking people to troll stores and then robbing those stores from potential sales seems a bit sleazy

Amazon could argue that people could browse its web site just the same and then shop elsewhere but that is hardly a fair comparison. Amazon's costs are much lower and it's not saddled with collecting sales taxes in many states. A brick and mortar store has a multitude of cost factors to bear in order to accommodate its shoppers. Amazon has only a fraction of such costs in comparison because of its online nature.

Is Amazon's tactic of using the physical stores as showrooms fair? It doesn't seem to me. And if one insists on shopping online, why not use eBay instead? It has more selections, better prices, supports small business much more widely and probably pulls fewer dirty tricks.

Amazon vs. eBay on Tax Collection

by @ 1:59 pm
Filed under: business,internet — Tags: , ,

 

 

So after all the bloviating and firing affiliates whose home states wanted to collect sales taxes from Amazon, suddenly it is talking fair taxation.

Where was the fairness when Amazon was (and still is) crushing small business all across the country? I don't like Amazon to begin with anyways, but I hope eBay can push this big bully back a little in defense of the small business.

Amazon, eBay square off over tax collection by small sellers

Amazon’s Humbling Moment

by @ 5:34 pm
Filed under: financial — Tags:

Two days before amazon announces earnings, it gets glowing remarks from a bunch of analysts with price targets of $280, give or take.

http://www.forbes.com/sites/ericsavitz/2011/10/24/amazon-blowout-q3-ahead/

Then amazon announces dismal earnings last night and takes a plunge down to around $200 today. What were these analysts thinking? So they just induce a bunch of people to sink money into amazon only to wake up to heavy losses two days later.

There’s really no need to wonder about where these analysts get their info. The answer is that the good ones throw darts, and the other ones, let’s just say, have other motives.

Amazon Culture

by @ 9:39 am
Filed under: google,web — Tags:

The tech geeks have been abuzz over a critical article written by a Google developer and leaked on Google+ by mistake. In that article, the author criticizes Google for its lack of a coherent platform and its SOA shortcomings as compared to companies such as facebook, Microsoft, and Amazon.

The author has since recanted his claims, calling them an opinionated rant. Surely a desire to remain employed by Google must have been a strong incentive. Never mind the Google critique, what really interested me was his depiction of Amazon. As an ex-employee of Amazon, he would have been in a position to know.

This is one of the passages describing Amazon:

And their operations are a mess; they don't really have SREs and they make engineers pretty much do everything, which leaves almost no time for coding - though again this varies by group, so it's luck of the draw. They don't give a single shit about charity or helping the needy or community contributions or anything like that. Never comes up there, except maybe to laugh about it. Their facilities are dirt-smeared cube farms without a dime spent on decor or common meeting areas.

A comment post from an Amazon ex-employee reads:

Amazon was a purely political environment where, if you weren't watching your back you'd get stabbed and become a rung in someone else's ladder. In our group, the manager had zero engineering experience (literally had gone to college to be a prison guard, somehow ended up "managing" programmers, though barely computer literate.

 

One might suspect the author has an unjustified grudge against Amazon, but I don't see why the author would trash Amazon when the goal of the article was to pick on Google. Software people generally tell it like it is, so perhaps he just happened to be in bad teams over at Amazon. I give it that at best.

My opinion of Amazon was already low, brought down by their arrogant and unethical behavior, but reading this article gave me more validation for my dislike of this company. I have continued to bypass Amazon and shop elsewhere since my initial disturbing experience with them. It's been most satisfying to deprive Amazon of even a cent of my money.

Amazon Fire and Silk

by @ 9:08 pm
Filed under: business,technology,web — Tags: , ,

So amazon finally announced its so-called secret product last week. With much fanfare the world was introduced the new Android-driven tablet called Fire, featuring the Silk browser. Oh, the Kindle is still there too, and at a huge discount to its more glorious days, but who cares about Kindle now.

As usual there has been a self-serving announcement on amazon's homepage alluding to the fact that they work hard to save their customers money via lower prices. Really? If that's the case how come Kindle was going for five times the current price not too long ago. Hate it when businesses pull that phony we-care nonsense when everyone knows money is the main objective and prices are determined based on what the market bears and not some altruistic algorithm. Whatever, amazon.

As for the new keyboard-less tablet, get ready for your every move to be tracked and recorded by amazon. You see, the Silk browser connects to the web via EC2, amazon's vast data network, allegedly to "optimize" user experience. Of course that also means amazon will take a little peep and record what the user does online. What it'll do with that data is yet undetermined.

Note: Author holds a negative bias towards amazon based on previous experience.

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