12 ms·

Why is Amazon all of a sudden not re-investing all its profits?

159 points by marcelweiss 10y ago

sharemywin 10y ago
I think they calculated wrong and forgot to spend all the money. They mentioned that Cloud Services was unusually more profitable this quarter.
- daveguy 10y ago
  I don't know. If you look at the income/growth graphs that growth from web services has continued quarterly for two years, and this is the second quarter of profit. I doubt they could have had an "oops" moment regarding almost a billion dollars over two quarters (6 months). It looks like a major change. Unless, like the article suggests, they are taking profits now to prepare for a larger capital investment in the near future.
- robmcm 10y ago
  Perhaps they were expecting the Echo to really flop.
- rhino369 10y ago
  Another thing to consider is how the money is spent changes how much profit is made. If Amazon reinvests into assets, that money isn't considered a loss. So it doesn't reduce profits. So when Amazon buys a video library those IPs are assets. You only deduct spending that are expenses. As Amazons business changes it might be harder to hide their profits in expenses.
  - brashrat 10y ago
    investments in assets result in depreciations which are expenses that reduce profits; you don't write off the asset as a loss all in one year, but it all gets written off across a series of years.
fweespee_ch 10y ago
http://www.nytimes.com/2014/04/26/business/amazons-shrinking-profit-sets-off-a-seismic-shock-to-its-shares.html?_r=0 http://www.nytimes.com/2014/04/26/business/amazons-shrinking... I think a couple years ago they got tired of their stock tanking every time they reported a lower profit than previous quarters.
- deegles 10y ago
  Employee compensation is heavily tied to stock, especially at the higher levels. You might be right!
- koluft 10y ago
  What are they going to doing they can't sustain these profits in future quarters?
  - fweespee_ch 10y ago
    Massive capex.
- justinhj 10y ago
  Wonder if they wouldn't be better off going private again
  - dpark 10y ago
    Sure. Bezos can just borrow ~250 billion to buy the rest of the company. Seems easy.
    - bwilliams18 10y ago
      A private equity firm would find the money in a heartbeat.
      - harryh 10y ago
        That would be over 4x bigger than the biggest PE buyout of all time. I'm not so sure it would be that easy.
clavalle 10y ago
Because that was the plan all along? At some point Amazon is going to get a return for all of its investment. The entire market is now dancing to Amazon's tune. Why not now?
- cylinder 10y ago
  They don't seem ready to me. Seems like a temporary blip due to their investment schedules. They clearly have ambitions to build out a logistics infrastructure, and they haven't even setup in some obvious markets yet (Australia). Lots more growth to pursue.
  - sitkack 10y ago
    30 million people over those distances? I wouldn't roll out in Au until driverless delivery.
- golergka 10y ago
  Because they have an incredible opportunity to grow further right now.
- pbreit 10y ago
  Bezos understands that the value of a stock is its discounted future cash flows.
  - clavalle 10y ago
    Discounted future /free/ cash flows. That's cash flow minus capital expenditures which means, at some point, Amazon is going to have to decide enough is enough and allow overall cash flow to come in well above its capital expenditures...like it's just done. Better a bit sooner than later (thanks to the discount part) if you think can sustain your advantage for less than you've been spending in proportion to your revenue. Perhaps Amazon has reached some sort of cruising altitude.
    - brashrat 10y ago
deleted 10y ago
[deleted]
mcherm 10y ago
Summary: Because they're "proving" they can make a profit when they want to in preparation for spending a decade investing 100% of profits into building a world-wide logistics system. (I think it's an interesting theory, but the author provided little evidence.)
- Touche 10y ago
  So they're going to establish a vertical monopoly on online retail. Great.
  - roddux 10y ago
    You mean they didn't already?
- ravivyas 10y ago
  I don't think any company will wait a few quarters to invest in something. And if they did that and win, well, they have invented a time machine.
  - nostrademons 10y ago
    Most big projects require a research & planning phase where a small team tries to learn everything possible about the domain, works out exactly what the opportunities are, and runs a few small trials to verify their assumptions. This is not capital intensive, and it's a good time to build up capital & goodwill for the rollout.
  - marcelweiss 10y ago
    I didn't mean to imply that they are waiting. This is just one part of the preperation stage, so to speak. In fact they already have begun. (see the end of the article for links to rumors and actual current movements into logistics by Amazon.) The timing and the incentives (employee retention) line up.
- simonebrunozzi 10y ago
  It's no secret news. Rumors about this has been around for several years.
golergka 10y ago
Do they really need to show that the switch is working? Shouldn't it be obvious from their financials?
- mabbo 10y ago
  People got spooked. The stock tumbled. Time to flip the switch back to 'profit' for a quarter or two, then once everyone understands that the switch exists, put it back to 'invest' where it belongs.
nahual 10y ago
AWS, prime, and content have much higher margins than _objects_, so a small unexpected increase in sales creates a disproportionate amount of profit.
- coredog64 10y ago
  I was joking with colleague last night that Amazon's unexpected profits were largely due to us not turning off on-demand i2.2xl development instances overnight.
ChuckMcM 10y ago
Frankly I'm surprised this hasn't happened sooner. So much money is sloshing through Amazon these days, keeping it balanced to the point where you don't let it accumulate (generating profit) or flow to fast (generating loss) has got to be scary complex. At every large company I've worked at there are things on the balance sheet that are "tunable" by management which helps with this. It was a running joke inside Network Appliance that we always beat expectations by $.01 cent per share. Of course until you didn't and that usually meant that what ever mechanisms you used for tuning your cash flow didn't have enough dynamic range to cover the change that quarter. Amazon then, being a services, merchandising, payment processor conglomeration then has to be crazy hard to manage cashflow in any meaningful way.
- rodionos 10y ago
  Is this "tuning" typically done on the revenue side or the cost side? I'm surprised it's at all possible with proper revenue and cost recognition policies in place.
  - pbreit 10y ago
    Spending $500m, $1b or $2b on video content is pretty easy to time.
    - adamt 10y ago
      But that isn't an immediate expense it's a balance sheet asset written off over a period of time.
  - ChuckMcM 10y ago
    At Sun there was literally a taped square on the floor of the factory, and things in that square were "shipped" to as the quarter was finishing up the factory would figure out how much had to be shipped to make the numbers, and they would process enough orders to make that happen. If there weren't orders, then some "one time deals" would be mentioned to top customers who might get a really nice discount or something. Sometimes contractors are told to go home until the next quarter. At NetApp there were other tools, service revenues, expenses, etc. One quarter the call went out for everyone to be sure they had expensed everything they had outstanding. Once the summer employee event shifted by a week. They would also do close the quarter incentive sales which could bring in just enough orders to keep it in line. As far as I can tell this is something they teach in business school as part of your MBA training. It seems pretty universal. When things can't be managed that way, you get actual unexpected surprises, lay offs, or work furloughs, or perhaps you decide you aren't going to hire nearly as many next year so you trim all the contract staff. Clearly people aren't as worried by over delivering as they are under delivering. As you can see from the Apple and Google earnings calls, a small miss negative can have an outsized impact on your stock price. But it is also important to not consistently have upside surprises as suddenly people start valuing the stock assuming an upside surprise.
tardo99 10y ago
I think it's because of the bubble. No sense investing in innovation when you're chasing billions invested by VC firms. Better to bank profits for a couple years and then come back in.
andr 10y ago
I find it very interesting to know what Amazon's competitive advantage would be from having their own logistics business. 1) Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology. 2) What they pay right now to FedEx, UPS, USPS, DHL, OnTrac, etc. should be very close to zero margin, given their position to negotiate those companies against each other in real time. Surely, the margin should be comparable to the cost of capital. 3) Amazon seems to represent less than 10% of packages in the US [1]. Given that they have to cover more or less the same area as other shipping companies have, they will not have the economies of scale of other firms, so their cost per shipment may end up higher. https://www.quora.com/Shipping-What-percentage-of-UPS-shipments-are-Amazon-boxes-packages https://www.quora.com/Shipping-What-percentage-of-UPS-shipme...
- ccorda 10y ago
  Re: #1, Prime Air would certainly change economics of the last mile: http://www.amazon.com/b?node=8037720011 http://www.amazon.com/b?node=8037720011
- SEMW 10y ago
  > Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology. I'm guessing it's the one-hour-delivery thing - last year they started testing one hour delivery for popular products in a couple of pilot cities.[0] Presumably they can't do one hour delivery with a traditional model of centralised-warehouse -> shipping company -> shipping company's regional hub -> customer; they need an Amazon warehouse near that city, with products dispatched from there to the customer directly, or it takes too much time. Building a warehouse and dispatch operation near every major city won't be cheap. [0] http://www.bbc.co.uk/newsbeat/article/33332018/amazon-launches-one-hour-delivery-service-prime-now-in-parts-of-london http://www.bbc.co.uk/newsbeat/article/33332018/amazon-launch...
  - eric_h 10y ago
    There are two components to Prime Now, at least in NYC. One is products that seem to be sold from an Amazon controlled or contracted warehouse, and the other are products sold by local businesses (e.g. produce from Westside Market).
perseusprime11 10y ago
Because many of their business have become self sustaining businesses like AWS.
harryh 10y ago
I don't accept the premise. It still has a PE of 530.
k2enemy 10y ago
Maybe they didn't stop re-investing all their profits. Whether Amazon keeps and re-invests all of its profit (as retained earnings) or returns it all to shareholders, the reported net income number doesn't change. It seems like you would have to look at their balance sheet to answer this, not just their income statement.
rdli 10y ago
Amazon's fundamental source of competitive advantage is rarely talked about, but I think this is a great example of what that is -- they have built a company that succeeds in very low margin businesses. So they started in online retail with < 10% gross margin. With AWS with its ~40% GM they have INCREASED the GM of the company. Contrast this with Microsoft and Google which sell software at 80%+ GM. When they do Azure or GCE, they have to decrease their GM. This is hard! FedEx runs around 60% GM. So just think about what this will do for Amazon ...
- bsder 10y ago
  > So they started in online retail with < 10% gross margin. They succeeded there because they didn't pay sales tax so they had a 5-10% advantage over brick and mortar. Now that that advantage is gone, they are finding that retail isn't so nice anymore.
hinkley 10y ago
Amazon bought 3 city blocks in Downtown Seattle a few years ago. Two of those are done or nearly done, the thirds one houses a scrotum-shaped building (three connected spheres, what's going on here?) that's still under construction. Technically that counts as reinvesting profits, but its the old "Are we an X company or a real estate company?" issue that happens so often. Personally I think it's the last chance for Bezos to roll around in his piles of cash before he has to start giving some back to his investors.
- gamegoblin 10y ago
  This is what those three connected spheres are: http://www.theverge.com/2013/10/24/5023454/amazon-giant-biodome-design-board-approval http://www.theverge.com/2013/10/24/5023454/amazon-giant-biod...
hkmurakami 10y ago
I wonder how much talent retention comes into play here, since Amazon has a very high ratio towards RSUs in the total comp package if I remember correctly. When $AMZN girates or tanks, at least some part of their workforce would be tempted to leave. Though maybe that's the exact segment they wouldn't mind see leaving anyways?
- Nacraile 10y ago
  > Though maybe that's the exact segment they wouldn't mind see leaving anyways? Generally the people who leave voluntarily are the people you don't want to see leave. Good talent is likely to have little difficulty finding better opportunities. Mediocre to bad employees are going to have a hard time finding another job, so they stick around. This is based on my personal observations as an Amazon employee, and not just hand-waving, by the way.
- amzn-336495 10y ago
  Amazon treats RSU's as cash compensation. It's a very stupid strategy to keep employees on the leash and from getting rich. If your RSU's double you won't get raises, bonuses, or more RSU's because your total compensation is above Amazon's "target" for you. This of course defeats the purpose of an incentive stock plan. Employee concerns are in no way aligned with the company when stock is just used as a cash bonus replacement. The ONLY reason people want stock is to make more than they could through salary. Amazon should just stop granting stock at this point since they too damn greedy to effectively use it to incentivize employees. People leave Amazon because if you want to get rich for your hard work you go somewhere else.
bashtoni 10y ago
My theory is they simply can't find enough things to spend on, but can't afford to lower AWS pricing without being swamped with more demand than they can handle. I don't think Amazon are preparing for period of capital investment - making profits and then taking them away is surely worse than consistently making very little as far as the stock market is concerned. This is not the sort of problem many businesses come up against.
kin 10y ago
Could Bezos somehow take these profits and invest it in Blue Origin?
martincmartin 10y ago
This happened once before, during early 2000s tech bubble burst, as was immortalized in the web comic The Joy of Tech: http://www.geekculture.com/joyoftech/joyarchives/288.html http://www.geekculture.com/joyoftech/joyarchives/288.html
20years 10y ago
I will probably get down voted but I think it's because we are in for a big downturn this year. Amazon is preparing for that and they will garner more market trust because they can show profits. When the bust happens, people are going to be very careful on what stocks they invest in and will most likely lean towards safer, profitable companies.
- nedwin 10y ago
  Are you saying Amazon have built a tool to time the market?
  - 20years 10y ago
    No of course not. The writing is on the wall. Amazon is just being very smart about it. This is a smart move imo.
  - RandomBacon 10y ago
    If Target can figure out that someone is pregnant based off of buying unscented lotion, mineral supplements, and cotton balls, then Amazon could easily gauge the financial health of its consumers. Perhaps they noticed a trend leading up to the last recession, and its occurring again. Whether or not it's true, it's certainly not outside the realm of possibility.
Animats 10y ago
Maybe the stockholders are getting restless. At some point, they have to pay dividends. Amazon is too big to be bought out. Much of Amazon's expansion is in physical facilities. Those are hard assets which can legitimately be financed with debt at low interest rates.
dekhn 10y ago
Because we transitioned to the next step of the Bezos Singularity State Machine.
digdogsmigsmog 10y ago
How can you all of a sudden not redo something?
mandeepj 10y ago
I think all of us who aspire to be entrepreneurs can learn something from the events happened after Amazon's stock crash during last quarterly earnings. Stock price dropped to about $482. Amazon quickly announced stock buyback program and stock is up again. It was around $612 before latest quarterly earnings report. And, it is now at $659. Keep an eye on Amazon's amazing stock management skills
slantaclaus 10y ago
Investors are demanding it.
bitemix 10y ago
I bet they go big on transportation.
mangeletti 10y ago
My theory: Bezos/Amazon is preparing for a potentially dangerous financial situation in the market, and taking a little cash out for a rainy day is a good idea.

159 points by marcelweiss 10y ago

I think they calculated wrong and forgot to spend all the money. They mentioned that Cloud Services was unusually more profitable this quarter.

daveguy 10y ago
I don't know. If you look at the income/growth graphs that growth from web services has continued quarterly for two years, and this is the second quarter of profit. I doubt they could have had an "oops" moment regarding almost a billion dollars over two quarters (6 months). It looks like a major change. Unless, like the article suggests, they are taking profits now to prepare for a larger capital investment in the near future.
robmcm 10y ago
Perhaps they were expecting the Echo to really flop.
rhino369 10y ago
Another thing to consider is how the money is spent changes how much profit is made. If Amazon reinvests into assets, that money isn't considered a loss. So it doesn't reduce profits. So when Amazon buys a video library those IPs are assets. You only deduct spending that are expenses. As Amazons business changes it might be harder to hide their profits in expenses.
- brashrat 10y ago
  investments in assets result in depreciations which are expenses that reduce profits; you don't write off the asset as a loss all in one year, but it all gets written off across a series of years.

fweespee_ch 10y ago

http://www.nytimes.com/2014/04/26/business/amazons-shrinking-profit-sets-off-a-seismic-shock-to-its-shares.html?_r=0 http://www.nytimes.com/2014/04/26/business/amazons-shrinking... I think a couple years ago they got tired of their stock tanking every time they reported a lower profit than previous quarters.

deegles 10y ago
Employee compensation is heavily tied to stock, especially at the higher levels. You might be right!
koluft 10y ago
What are they going to doing they can't sustain these profits in future quarters?
- fweespee_ch 10y ago
  Massive capex.
justinhj 10y ago
Wonder if they wouldn't be better off going private again
- dpark 10y ago
  Sure. Bezos can just borrow ~250 billion to buy the rest of the company. Seems easy.
  - bwilliams18 10y ago
    A private equity firm would find the money in a heartbeat.
    - harryh 10y ago
      That would be over 4x bigger than the biggest PE buyout of all time. I'm not so sure it would be that easy.

clavalle 10y ago

Because that was the plan all along? At some point Amazon is going to get a return for all of its investment. The entire market is now dancing to Amazon's tune. Why not now?

cylinder 10y ago
They don't seem ready to me. Seems like a temporary blip due to their investment schedules. They clearly have ambitions to build out a logistics infrastructure, and they haven't even setup in some obvious markets yet (Australia). Lots more growth to pursue.
- sitkack 10y ago
  30 million people over those distances? I wouldn't roll out in Au until driverless delivery.
golergka 10y ago
Because they have an incredible opportunity to grow further right now.
pbreit 10y ago
Bezos understands that the value of a stock is its discounted future cash flows.
- clavalle 10y ago
  Discounted future /free/ cash flows. That's cash flow minus capital expenditures which means, at some point, Amazon is going to have to decide enough is enough and allow overall cash flow to come in well above its capital expenditures...like it's just done. Better a bit sooner than later (thanks to the discount part) if you think can sustain your advantage for less than you've been spending in proportion to your revenue. Perhaps Amazon has reached some sort of cruising altitude.
  - brashrat 10y ago

deleted 10y ago

[deleted]

mcherm 10y ago

Summary: Because they're "proving" they can make a profit when they want to in preparation for spending a decade investing 100% of profits into building a world-wide logistics system. (I think it's an interesting theory, but the author provided little evidence.)

Touche 10y ago
So they're going to establish a vertical monopoly on online retail. Great.
- roddux 10y ago
  You mean they didn't already?
ravivyas 10y ago
I don't think any company will wait a few quarters to invest in something. And if they did that and win, well, they have invented a time machine.
- nostrademons 10y ago
  Most big projects require a research & planning phase where a small team tries to learn everything possible about the domain, works out exactly what the opportunities are, and runs a few small trials to verify their assumptions. This is not capital intensive, and it's a good time to build up capital & goodwill for the rollout.
- marcelweiss 10y ago
  I didn't mean to imply that they are waiting. This is just one part of the preperation stage, so to speak. In fact they already have begun. (see the end of the article for links to rumors and actual current movements into logistics by Amazon.) The timing and the incentives (employee retention) line up.
simonebrunozzi 10y ago
It's no secret news. Rumors about this has been around for several years.

golergka 10y ago

Do they really need to show that the switch is working? Shouldn't it be obvious from their financials?

mabbo 10y ago
People got spooked. The stock tumbled. Time to flip the switch back to 'profit' for a quarter or two, then once everyone understands that the switch exists, put it back to 'invest' where it belongs.

nahual 10y ago

AWS, prime, and content have much higher margins than _objects_, so a small unexpected increase in sales creates a disproportionate amount of profit.

coredog64 10y ago
I was joking with colleague last night that Amazon's unexpected profits were largely due to us not turning off on-demand i2.2xl development instances overnight.

ChuckMcM 10y ago

Frankly I'm surprised this hasn't happened sooner. So much money is sloshing through Amazon these days, keeping it balanced to the point where you don't let it accumulate (generating profit) or flow to fast (generating loss) has got to be scary complex. At every large company I've worked at there are things on the balance sheet that are "tunable" by management which helps with this. It was a running joke inside Network Appliance that we always beat expectations by $.01 cent per share. Of course until you didn't and that usually meant that what ever mechanisms you used for tuning your cash flow didn't have enough dynamic range to cover the change that quarter. Amazon then, being a services, merchandising, payment processor conglomeration then has to be crazy hard to manage cashflow in any meaningful way.

rodionos 10y ago
Is this "tuning" typically done on the revenue side or the cost side? I'm surprised it's at all possible with proper revenue and cost recognition policies in place.
- pbreit 10y ago
  Spending $500m, $1b or $2b on video content is pretty easy to time.
  - adamt 10y ago
    But that isn't an immediate expense it's a balance sheet asset written off over a period of time.
- ChuckMcM 10y ago
  At Sun there was literally a taped square on the floor of the factory, and things in that square were "shipped" to as the quarter was finishing up the factory would figure out how much had to be shipped to make the numbers, and they would process enough orders to make that happen. If there weren't orders, then some "one time deals" would be mentioned to top customers who might get a really nice discount or something. Sometimes contractors are told to go home until the next quarter. At NetApp there were other tools, service revenues, expenses, etc. One quarter the call went out for everyone to be sure they had expensed everything they had outstanding. Once the summer employee event shifted by a week. They would also do close the quarter incentive sales which could bring in just enough orders to keep it in line. As far as I can tell this is something they teach in business school as part of your MBA training. It seems pretty universal. When things can't be managed that way, you get actual unexpected surprises, lay offs, or work furloughs, or perhaps you decide you aren't going to hire nearly as many next year so you trim all the contract staff. Clearly people aren't as worried by over delivering as they are under delivering. As you can see from the Apple and Google earnings calls, a small miss negative can have an outsized impact on your stock price. But it is also important to not consistently have upside surprises as suddenly people start valuing the stock assuming an upside surprise.

tardo99 10y ago

I think it's because of the bubble. No sense investing in innovation when you're chasing billions invested by VC firms. Better to bank profits for a couple years and then come back in.

andr 10y ago

I find it very interesting to know what Amazon's competitive advantage would be from having their own logistics business. 1) Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology. 2) What they pay right now to FedEx, UPS, USPS, DHL, OnTrac, etc. should be very close to zero margin, given their position to negotiate those companies against each other in real time. Surely, the margin should be comparable to the cost of capital. 3) Amazon seems to represent less than 10% of packages in the US [1]. Given that they have to cover more or less the same area as other shipping companies have, they will not have the economies of scale of other firms, so their cost per shipment may end up higher. https://www.quora.com/Shipping-What-percentage-of-UPS-shipments-are-Amazon-boxes-packages https://www.quora.com/Shipping-What-percentage-of-UPS-shipme...

ccorda 10y ago
Re: #1, Prime Air would certainly change economics of the last mile: http://www.amazon.com/b?node=8037720011 http://www.amazon.com/b?node=8037720011
SEMW 10y ago
> Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology. I'm guessing it's the one-hour-delivery thing - last year they started testing one hour delivery for popular products in a couple of pilot cities.[0] Presumably they can't do one hour delivery with a traditional model of centralised-warehouse -> shipping company -> shipping company's regional hub -> customer; they need an Amazon warehouse near that city, with products dispatched from there to the customer directly, or it takes too much time. Building a warehouse and dispatch operation near every major city won't be cheap. [0] http://www.bbc.co.uk/newsbeat/article/33332018/amazon-launches-one-hour-delivery-service-prime-now-in-parts-of-london http://www.bbc.co.uk/newsbeat/article/33332018/amazon-launch...
- eric_h 10y ago
  There are two components to Prime Now, at least in NYC. One is products that seem to be sold from an Amazon controlled or contracted warehouse, and the other are products sold by local businesses (e.g. produce from Westside Market).

perseusprime11 10y ago

Because many of their business have become self sustaining businesses like AWS.

harryh 10y ago

I don't accept the premise. It still has a PE of 530.

k2enemy 10y ago

Maybe they didn't stop re-investing all their profits. Whether Amazon keeps and re-invests all of its profit (as retained earnings) or returns it all to shareholders, the reported net income number doesn't change. It seems like you would have to look at their balance sheet to answer this, not just their income statement.

rdli 10y ago

Amazon's fundamental source of competitive advantage is rarely talked about, but I think this is a great example of what that is -- they have built a company that succeeds in very low margin businesses. So they started in online retail with < 10% gross margin. With AWS with its ~40% GM they have INCREASED the GM of the company. Contrast this with Microsoft and Google which sell software at 80%+ GM. When they do Azure or GCE, they have to decrease their GM. This is hard! FedEx runs around 60% GM. So just think about what this will do for Amazon ...

bsder 10y ago
> So they started in online retail with < 10% gross margin. They succeeded there because they didn't pay sales tax so they had a 5-10% advantage over brick and mortar. Now that that advantage is gone, they are finding that retail isn't so nice anymore.

hinkley 10y ago

Amazon bought 3 city blocks in Downtown Seattle a few years ago. Two of those are done or nearly done, the thirds one houses a scrotum-shaped building (three connected spheres, what's going on here?) that's still under construction. Technically that counts as reinvesting profits, but its the old "Are we an X company or a real estate company?" issue that happens so often. Personally I think it's the last chance for Bezos to roll around in his piles of cash before he has to start giving some back to his investors.

gamegoblin 10y ago
This is what those three connected spheres are: http://www.theverge.com/2013/10/24/5023454/amazon-giant-biodome-design-board-approval http://www.theverge.com/2013/10/24/5023454/amazon-giant-biod...

hkmurakami 10y ago

I wonder how much talent retention comes into play here, since Amazon has a very high ratio towards RSUs in the total comp package if I remember correctly. When $AMZN girates or tanks, at least some part of their workforce would be tempted to leave. Though maybe that's the exact segment they wouldn't mind see leaving anyways?

Nacraile 10y ago
> Though maybe that's the exact segment they wouldn't mind see leaving anyways? Generally the people who leave voluntarily are the people you don't want to see leave. Good talent is likely to have little difficulty finding better opportunities. Mediocre to bad employees are going to have a hard time finding another job, so they stick around. This is based on my personal observations as an Amazon employee, and not just hand-waving, by the way.
amzn-336495 10y ago
Amazon treats RSU's as cash compensation. It's a very stupid strategy to keep employees on the leash and from getting rich. If your RSU's double you won't get raises, bonuses, or more RSU's because your total compensation is above Amazon's "target" for you. This of course defeats the purpose of an incentive stock plan. Employee concerns are in no way aligned with the company when stock is just used as a cash bonus replacement. The ONLY reason people want stock is to make more than they could through salary. Amazon should just stop granting stock at this point since they too damn greedy to effectively use it to incentivize employees. People leave Amazon because if you want to get rich for your hard work you go somewhere else.

bashtoni 10y ago

My theory is they simply can't find enough things to spend on, but can't afford to lower AWS pricing without being swamped with more demand than they can handle. I don't think Amazon are preparing for period of capital investment - making profits and then taking them away is surely worse than consistently making very little as far as the stock market is concerned. This is not the sort of problem many businesses come up against.

kin 10y ago

Could Bezos somehow take these profits and invest it in Blue Origin?

martincmartin 10y ago

This happened once before, during early 2000s tech bubble burst, as was immortalized in the web comic The Joy of Tech: http://www.geekculture.com/joyoftech/joyarchives/288.html http://www.geekculture.com/joyoftech/joyarchives/288.html

20years 10y ago

I will probably get down voted but I think it's because we are in for a big downturn this year. Amazon is preparing for that and they will garner more market trust because they can show profits. When the bust happens, people are going to be very careful on what stocks they invest in and will most likely lean towards safer, profitable companies.

nedwin 10y ago
Are you saying Amazon have built a tool to time the market?
- 20years 10y ago
  No of course not. The writing is on the wall. Amazon is just being very smart about it. This is a smart move imo.
- RandomBacon 10y ago
  If Target can figure out that someone is pregnant based off of buying unscented lotion, mineral supplements, and cotton balls, then Amazon could easily gauge the financial health of its consumers. Perhaps they noticed a trend leading up to the last recession, and its occurring again. Whether or not it's true, it's certainly not outside the realm of possibility.

Animats 10y ago

Maybe the stockholders are getting restless. At some point, they have to pay dividends. Amazon is too big to be bought out. Much of Amazon's expansion is in physical facilities. Those are hard assets which can legitimately be financed with debt at low interest rates.

dekhn 10y ago

Because we transitioned to the next step of the Bezos Singularity State Machine.

digdogsmigsmog 10y ago

How can you all of a sudden not redo something?

mandeepj 10y ago

I think all of us who aspire to be entrepreneurs can learn something from the events happened after Amazon's stock crash during last quarterly earnings. Stock price dropped to about $482. Amazon quickly announced stock buyback program and stock is up again. It was around $612 before latest quarterly earnings report. And, it is now at $659. Keep an eye on Amazon's amazing stock management skills

slantaclaus 10y ago

Investors are demanding it.

bitemix 10y ago

I bet they go big on transportation.

mangeletti 10y ago

My theory: Bezos/Amazon is preparing for a potentially dangerous financial situation in the market, and taking a little cash out for a rainy day is a good idea.