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MikeP688
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MikeP688,
User Rank: Light Sabre
4/27/2015 | 2:00:54 PM
Re: Don't Be Yourself
I get that --but you need to realize that the patience of investor/speculators can only go so far.    I personally enjoy watching Amazon and believe Bezos will continue to razzle and dazzle--but time will tell.   Appreciate your insights @brooks7 :-) 
brooks7
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brooks7,
User Rank: Light Sabre
4/27/2015 | 1:37:53 PM
Re: Don't Be Yourself
Yes - in a high growth environment - being break even is acceptable as long as it is the plan.  Once territory is seized, then you can back down on expenses and manage your business more profitably.  Want another example?  Try Enphase in the solar power converter business.  Could they make more money?  Why yes...taking market share requires investment so they choose not to.  All depends on where all of what you are doing is on the Product Life Cycle and what markets you are in.

seven

 
MikeP688
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MikeP688,
User Rank: Light Sabre
4/27/2015 | 12:22:22 PM
Re: Don't Be Yourself
Are you suggesting that being breakeven is justified and justifying the high valuation?    I did some the "gross operating profit"--What is fascinating is that Amazon is in it for the long haul--and I think in that we can agree.
brooks7
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brooks7,
User Rank: Light Sabre
4/27/2015 | 10:38:29 AM
Re: Don't Be Yourself
Just FYI, Amazon made a modest operating profit.  The losses were due to taxes and interest and were modest as well.

Essentially, Amazon is operating at break even so ($52M loss on $22B in Sales) that implies that this is intentional.  Grow into your earnings is pretty much a standard practice in the "grab market share" game.

seven

 
MikeP688
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MikeP688,
User Rank: Light Sabre
4/27/2015 | 6:37:38 AM
Re: Don't Be Yourself
It is part of a broader problem worldwide because it seems that "bigger is better" which truly stifles innovation.   I finished this earlier on one of my channels that reflected upon Apple v. IBM--it is compelling reading that the leading luminaries of our time have to taken notice.... 
jabailo
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jabailo,
User Rank: Light Sabre
4/26/2015 | 10:18:20 PM
Re: Don't Be Yourself

It's a serious problem.  You have to dissect these businesses because right now they are holding gargantuan amounts of capital.  People are expecting both a "safe bet" and enourmous growth.  Who wouldn't want that, right?   But in the meantime, because the Hogs are holding on as hard as they can, any new growth, speculative or technologically edgy business (exactly the sorts we want right now to start exploiting 21st century technology and to create jobs and midsized businesses) can't get access to that capital as easily as they might.  It's the same problem with real estate and up until recently, oil.


MikeP688
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MikeP688,
User Rank: Light Sabre
4/26/2015 | 8:53:14 PM
Re: Don't Be Yourself
Wow..Enron is quite a "Stretch.

But the scepticism I have noted prevails--so far the markets have not pulled the rug from under Amazon.    How long it can sustain is to me the big question--and on that I think you and I agree on.

 
jabailo
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jabailo,
User Rank: Light Sabre
4/26/2015 | 8:31:02 PM
Re: Don't Be Yourself
Enron comes to mind.   Building small bits of profit to mask a superstructure of ever lessening (or money losing) enterprises.  Someone will have to call, at some point.

Because at the end of the day, all you're saying is Amazon is a Cloud vendor selling rack space.   And now Microsoft is a Cloud vendor.   But...almost every business written about here is a cloud vendor.

I am not seeing the special value of having a profitable cloud business saddled with a potentially disasterous low profit, high overhead "other" business other than the cloud business masks all the potential for complete collapse.

In logic this is called the Least Plausible Hypothesis.   You are claiming that overall this explains the "success" of the business.  But you can show that it's just a two businesses glued together, one, unsuccessful, and one, the smaller half, successful, but you're building your argument only on that very much smaller part.

(In this same way Climate Scientists explain the decades of where there is cooling by resorting to a weak theory of aerosols.)

Business needs to make the transition to the 21st century.  Completely.



 

 
MikeP688
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MikeP688,
User Rank: Light Sabre
4/26/2015 | 6:14:50 PM
Re: Don't Be Yourself
History is full of such examples.     The question continues to be whether the Market will sustain the philosophy that Jeff Bezos underscores constantly--so far it does becuase the underlying fundamentals of Amazon (Beyond the "Book Selling") seems ot be ever so solid and engaging.    It will be fun to continually assess it though--isn't it?

 
jabailo
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jabailo,
User Rank: Light Sabre
4/24/2015 | 5:39:03 PM
Re: Don't Be Yourself
It's like a living example of the old vaudeville joke:

Businessman:  You see, we lose a little bit on each sale.
Reporter:  So how do you stay in business?
Businessman:  Volume!

But seriously, this idea of putting a little "cherry" on top of a pile of sawdust and calling it an ice cream sundae is unfortunately becoming the norm for many large cap stocks.   It's kind of a ruse in many ways because the big of high profit masks a giant money losing operation.   Add it all together and it appears as slow but steady growth.  However, what happens when the foundation crumbles?   



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