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But.. it, IS a business. No profit = FAIL. At some point the funding they are getting, from investors and stock owners is going to dry up like the Serengeti whe

by X86BSD 10y ago

But.. it, IS a business. No profit = FAIL. At some point the funding they are getting, from investors and stock owners is going to dry up like the Serengeti when they realize they won't make money. It's fine to invest and take losses if you're a new start up. Amazon is neither new nor a startup. At some point they need to start making money. Otherwise they are just a bucket for fools to throw their money in. It's shocking they still don't make money. "We will make it up in volume!". Talk about a tech bubble.

jsolson 10y ago
> No profit = FAIL. At some point the funding they are getting, from investors and stock owners is going to dry up like the Serengeti when they realize they won't make money. An explicit part of their business plan is maximizing free cash flow (not profits). I'm not sure what funding you think the company is getting from investors. Amazon's stock price could drop through the floor and the biggest issue the company itself would face is the departure of a workforce who take a significant chunk of their compensation in AMZN shares. Unless they're hoping to do another public stock offering the share price is mostly useful as a gauge on Jeff Bezos's net worth. When the company does want outside funding, it hasn't turned to public stock offerings in recent years. Instead they've secured it by issuing corporate bonds[0]. THERE is somewhere they might have to worry, but as long as their credit rating stays high, they'll find plenty of institutional buyers. Their credit rating is maintained by people who understand that profitability has little to do with how well a large business is doing, and is sometimes an indication of failure to manage funds well (failing to employ depreciation appropriately to minimize tax liability in very successful years, etc.). [0]:https://www.bloomberg.com/news/articles/2014-12-02/amazon-sells-6-billion-in-biggest-bond-deal-for-online-retailer https://www.bloomberg.com/news/articles/2014-12-02/amazon-se...
sirakov 10y ago
The people and investors who matter have already made their money.
serge2k 10y ago
Their cash flow is fine. They aren't blowing investor money to do what they do. They are reinvesting profits into growth.
openasocket 10y ago
The no profit thing is one purpose. Basically what Amazon does is it takes all the money it made in profit and reinvests it in the company: buys new inventory, builds new warehouses, hires new developers, etc. It's actually a somewhat-common model to grow a company rapidly. In fact, a few quarters ago, Amazon actually made a profit by accident, because they could not reinvest the money fast enough.
btilly 10y ago
To a reasonable approximation, the goal of a business is to maximize the projected value of the business to investors. If the business does not believe that it has growth opportunities that beat the market, then it should try to generate a profit and return that to investors so that they can look for better opportunities. Conversely if it does believe that it has such growth opportunities, the business should take any free cash that it generates and reinvest that inside of the business. If they are right, they will grow faster than the market. If they are wrong, they will at least acquire resources that can be sold later to recoup at least some of that money. Amazon in particular pushes a tremendous amount of flexibility to individual business units to pursue growth strategies. As a result they always believe that they have better internal growth opportunities than the market in general. Their rapid growth is a demonstration that they have been right more often than not. They can switch to generating profit at any time that they want. Just shut down unnecessary areas of the business that are losing money. (Something that they do all of the time whenever they conclude that an idea hasn't worked out.) However when they take that decision, that will be evidence that senior management has lost confidence in the organization. Which will be a sign of internal problems.
crucifiction 10y ago
1) They do make money (profit) and they also re-invest 2) About 20% of the S&P 500 companies do not pay a dividend, are they failures? For example, Apple did not pay a dividend until a few years ago and continues to have $200B stockpiled. Is it a failure? Like it or not, in the last 30-ish years stocks have become just as much for trading as they were for profit sharing/dividend income. If a stock does not pay a dividend, who cares if it makes a profit?

by X86BSD 10y ago

jsolson 10y ago

> No profit = FAIL. At some point the funding they are getting, from investors and stock owners is going to dry up like the Serengeti when they realize they won't make money. An explicit part of their business plan is maximizing free cash flow (not profits). I'm not sure what funding you think the company is getting from investors. Amazon's stock price could drop through the floor and the biggest issue the company itself would face is the departure of a workforce who take a significant chunk of their compensation in AMZN shares. Unless they're hoping to do another public stock offering the share price is mostly useful as a gauge on Jeff Bezos's net worth. When the company does want outside funding, it hasn't turned to public stock offerings in recent years. Instead they've secured it by issuing corporate bonds[0]. THERE is somewhere they might have to worry, but as long as their credit rating stays high, they'll find plenty of institutional buyers. Their credit rating is maintained by people who understand that profitability has little to do with how well a large business is doing, and is sometimes an indication of failure to manage funds well (failing to employ depreciation appropriately to minimize tax liability in very successful years, etc.). [0]:https://www.bloomberg.com/news/articles/2014-12-02/amazon-sells-6-billion-in-biggest-bond-deal-for-online-retailer https://www.bloomberg.com/news/articles/2014-12-02/amazon-se...

sirakov 10y ago

The people and investors who matter have already made their money.

serge2k 10y ago

Their cash flow is fine. They aren't blowing investor money to do what they do. They are reinvesting profits into growth.

openasocket 10y ago

The no profit thing is one purpose. Basically what Amazon does is it takes all the money it made in profit and reinvests it in the company: buys new inventory, builds new warehouses, hires new developers, etc. It's actually a somewhat-common model to grow a company rapidly. In fact, a few quarters ago, Amazon actually made a profit by accident, because they could not reinvest the money fast enough.

btilly 10y ago

To a reasonable approximation, the goal of a business is to maximize the projected value of the business to investors. If the business does not believe that it has growth opportunities that beat the market, then it should try to generate a profit and return that to investors so that they can look for better opportunities. Conversely if it does believe that it has such growth opportunities, the business should take any free cash that it generates and reinvest that inside of the business. If they are right, they will grow faster than the market. If they are wrong, they will at least acquire resources that can be sold later to recoup at least some of that money. Amazon in particular pushes a tremendous amount of flexibility to individual business units to pursue growth strategies. As a result they always believe that they have better internal growth opportunities than the market in general. Their rapid growth is a demonstration that they have been right more often than not. They can switch to generating profit at any time that they want. Just shut down unnecessary areas of the business that are losing money. (Something that they do all of the time whenever they conclude that an idea hasn't worked out.) However when they take that decision, that will be evidence that senior management has lost confidence in the organization. Which will be a sign of internal problems.

crucifiction 10y ago

1) They do make money (profit) and they also re-invest 2) About 20% of the S&P 500 companies do not pay a dividend, are they failures? For example, Apple did not pay a dividend until a few years ago and continues to have $200B stockpiled. Is it a failure? Like it or not, in the last 30-ish years stocks have become just as much for trading as they were for profit sharing/dividend income. If a stock does not pay a dividend, who cares if it makes a profit?