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Crazy moves like "heavy spending on warehouses, data centers and digital-content offerings" An online store buying stock and building infrastructure !!!!! Craz

Crazy moves like "heavy spending on warehouses, data centers and digital-content offerings" An online store buying stock and building infrastructure !!!!! Crazy , they should be borrowing money and paying themselves bonuses before going bust - that's what Wall St wants

jrockway 15y ago
Wall Street share prices are not particularly high either.
- eurohacker 15y ago
  yes, but management and insiders make money as always
chugger 15y ago
How about the $50 Amazon is losing per Kindle Fire sold?
- tomkarlo 15y ago
  They haven't sold any yet.
- srdev 15y ago
  Has that been confirmed? I've heard anywhere from $5 to $50, and its always been from analysists trying to estimate the cost from parts. As far as I know, the only people who really know how much the Kindle costs to make are Amazon.
  - cas 15y ago
    This piece gives a run down of all the analysts claims, with some calculating a $50 profit instead but as you can imagine none of it is substantiated. http://news.cnet.com/8301-1023_3-20114722-93/amazon-kindle-fire-profit-or-loss-for-retailer/ http://news.cnet.com/8301-1023_3-20114722-93/amazon-kindle-f...
    - srdev 15y ago
      Interesting. To summarize, it looks like the $50 loss comes from an analyst comparing it to the iPad, whereas the $50 profit claim comes from a firm comparing it to the more-similar BlackBerry Playbook. The research firm that did a tear-down estimated it at about a $10 loss. In other words, no-one really knows, but it looks like they're probably closer to breaking even than chugger claims. Chugger is taking the worst-case estimate here, and also the one that seems the most unsubstantiated. Thanks for the link.
      - 0x12 15y ago
        chugger == troll. A good one, but still a troll. http://news.ycombinator.com/threads?id=chugger http://news.ycombinator.com/threads?id=chugger
- Tsagadai 15y ago
  It is a tried and tested method for selling technology. Look at the history of the Sony Playstation. Sell the hardware at a loss and make double your money back from software and content.
- brc 15y ago
  A tried and true strategy. That has worked for (in no particular order) : ATM's, Printers, Razors, Mobile Phones, Gaming Platforms and probably even cars in some cases. If Sony had cottoned onto this strategy, Beta would have been the worldwide video standard and they would have been paid back massively in royalties. Shifting hardware at a loss to lock in consumers is the oldest trick in the book. Nowhere is it more important than when introducing a new technology and a new way of working. I can see that in 10 years time a Kindle will be almost free.
  - jsz0 15y ago
    My understanding is Apple doesn't make all that much money off the iTunes Store using a similar model. Does it really work for digital media? (besides console games)
    - ceejayoz 15y ago
      Apple doesn't use a similar model, they use the exact opposite model. They sell content at minimal profit to enhance the ecosystem for their devices, which they make a very tidy profit on.
      - gujk 15y ago
        Maybe for music, but is that still true for the App Store?
        eitland 15y ago
        Apps is a special case were they make a nice profit from both selling apps that they haven't created and selling devices that run said apps.
        ceejayoz 15y ago
        It's still pretty true for the App Store. Apple hit the $2B paid out to developers mark early this year, IIRC, which means about $1B of revenue for Apple for the entirety of the App Store's existence. Their latest quarter saw nearly $30B revenue, so it's still a pretty tiny part of their business.
- ippisl 15y ago
  This number is meaningless(and probably wrong) if you don't know the extra profits it would generate, and what's at stake here. Some estimates(read:guesses) think that 50% of kindle users will subscribe to to amazon prime. Prime users are extremely loyal to amazon, do all their online shopping in amazon and use brick and mortar shops much less than before signing with prime.They tend to buy 3x-4x than before, in amazon. Prime is a very hard service to provide. It requires a big and expensive logistics chain. It's a monopoly level competitive advantage. It can make amazon a monopoly in the range of walmart (maybe). Also the kindle fire is a great advertising unit. Better than TV - because the ads can be much more targeted, And you can buy with a single click from the ad. Combine the two, and amazon gets almost total control of the customer. And given Bezos's brilliance that's probably only the tip of the iceberg. So what's a little discount on a little gadget to get all of this ?
  - eupharis 15y ago
    That 50% number seems high to me. Seems chicken-and-egg. Do they buy a Kindle then subscribe to Amazon Prime or do they use Amazon a lot and thus get both a Kindle and Amazon Prime? And like most chicken-and-egg questions, the answer is both and neither. As someone who has spent far too much time puttering around brick-and-mortar stores recently, before walking away in disgust and just buying it on Amazon, I can't help but think Amazon is just spending to widen an already vast competitive edge. This isn't apples versus oranges. This is sailboat versus steamboat.
    - ippisl 15y ago
      When you buy a kindle fire , you get prime free for 30 days. after that, you need to subscribe. Yes, the 50% is high, but people who tried prime are really , really happy with it, so maybe 50% makes sense. And yes, it's definitely cars vs horses.
  - joelhooks 15y ago
    And when they (we) are in store they break out the Amazon app, scan barcodes and have items shipped next day at a sizable discount over the store cost + sales tax.
- firefoxman1 15y ago
  Yeah, how about losing money on every book sold back when they started? It seemed to work for them.
  - gujk 15y ago
    Amazon has never said no to paying a dollar of fixed overhead to generate $1.01 in lifetime marginal profit. Amazon is also willing to write down the first 5 years of a product's life as overhead. That is JeffB's genius (along with the ability to get the accounting right on these razor thin margins).
- nobody3141 15y ago
  Given that it's specs aren't much more than $100 chinese Android 2.3 tablets I doubt they are losing anything. Especially since they don't have a retailer taking 30% Their policy for the other Kindles was to recover the R&D initially and then sell them at not much more than cost.
- vidar 15y ago
  I was just doing the numbers on my 6 month old Kindle: 250 dollars spent on books since then, I wouldnt worry about device losses.
- danssig 15y ago
  Apple, if you're listening, I've got an idea! First, you need to prove beyond any doubt that the Fire is being sold at a loss. Once you know this, set up some dummy stores and invest the billions of dollars you have laying around in buying as many as you can. Once you have them, put them all in a compactor. Make sure each one is destroyed without anyone having laid a finger on it. See how long Amazon can sell these things at a loss without making anything from them.
  - ceejayoz 15y ago
    Apple's cash-on-hand is nearly as much as Amazon's total market cap. If they wanted to take out Amazon, there are much easier ways.
jonnathanson 15y ago
Back in the day, "heavy spending on warehouses, data centers, and digital content offerings" would be labeled what it is: plowback. The company is reinvesting some of its earnings back into the business, rather than using those profits simply to reward shareholders. It's a long-term move, and Wall Street analysts these days seem wholly incapable of thinking further out than a quarter or two.

jrockway 15y ago

Wall Street share prices are not particularly high either.

eurohacker 15y ago
yes, but management and insiders make money as always

chugger 15y ago

How about the $50 Amazon is losing per Kindle Fire sold?

tomkarlo 15y ago
They haven't sold any yet.
srdev 15y ago
Has that been confirmed? I've heard anywhere from $5 to $50, and its always been from analysists trying to estimate the cost from parts. As far as I know, the only people who really know how much the Kindle costs to make are Amazon.
- cas 15y ago
  This piece gives a run down of all the analysts claims, with some calculating a $50 profit instead but as you can imagine none of it is substantiated. http://news.cnet.com/8301-1023_3-20114722-93/amazon-kindle-fire-profit-or-loss-for-retailer/ http://news.cnet.com/8301-1023_3-20114722-93/amazon-kindle-f...
  - srdev 15y ago
    Interesting. To summarize, it looks like the $50 loss comes from an analyst comparing it to the iPad, whereas the $50 profit claim comes from a firm comparing it to the more-similar BlackBerry Playbook. The research firm that did a tear-down estimated it at about a $10 loss. In other words, no-one really knows, but it looks like they're probably closer to breaking even than chugger claims. Chugger is taking the worst-case estimate here, and also the one that seems the most unsubstantiated. Thanks for the link.
    - 0x12 15y ago
      chugger == troll. A good one, but still a troll. http://news.ycombinator.com/threads?id=chugger http://news.ycombinator.com/threads?id=chugger
Tsagadai 15y ago
It is a tried and tested method for selling technology. Look at the history of the Sony Playstation. Sell the hardware at a loss and make double your money back from software and content.
brc 15y ago
A tried and true strategy. That has worked for (in no particular order) : ATM's, Printers, Razors, Mobile Phones, Gaming Platforms and probably even cars in some cases. If Sony had cottoned onto this strategy, Beta would have been the worldwide video standard and they would have been paid back massively in royalties. Shifting hardware at a loss to lock in consumers is the oldest trick in the book. Nowhere is it more important than when introducing a new technology and a new way of working. I can see that in 10 years time a Kindle will be almost free.
- jsz0 15y ago
  My understanding is Apple doesn't make all that much money off the iTunes Store using a similar model. Does it really work for digital media? (besides console games)
  - ceejayoz 15y ago
    Apple doesn't use a similar model, they use the exact opposite model. They sell content at minimal profit to enhance the ecosystem for their devices, which they make a very tidy profit on.
    - gujk 15y ago
      Maybe for music, but is that still true for the App Store?
      - eitland 15y ago
        Apps is a special case were they make a nice profit from both selling apps that they haven't created and selling devices that run said apps.
      - ceejayoz 15y ago
        It's still pretty true for the App Store. Apple hit the $2B paid out to developers mark early this year, IIRC, which means about $1B of revenue for Apple for the entirety of the App Store's existence. Their latest quarter saw nearly $30B revenue, so it's still a pretty tiny part of their business.
ippisl 15y ago
This number is meaningless(and probably wrong) if you don't know the extra profits it would generate, and what's at stake here. Some estimates(read:guesses) think that 50% of kindle users will subscribe to to amazon prime. Prime users are extremely loyal to amazon, do all their online shopping in amazon and use brick and mortar shops much less than before signing with prime.They tend to buy 3x-4x than before, in amazon. Prime is a very hard service to provide. It requires a big and expensive logistics chain. It's a monopoly level competitive advantage. It can make amazon a monopoly in the range of walmart (maybe). Also the kindle fire is a great advertising unit. Better than TV - because the ads can be much more targeted, And you can buy with a single click from the ad. Combine the two, and amazon gets almost total control of the customer. And given Bezos's brilliance that's probably only the tip of the iceberg. So what's a little discount on a little gadget to get all of this ?
- eupharis 15y ago
  That 50% number seems high to me. Seems chicken-and-egg. Do they buy a Kindle then subscribe to Amazon Prime or do they use Amazon a lot and thus get both a Kindle and Amazon Prime? And like most chicken-and-egg questions, the answer is both and neither. As someone who has spent far too much time puttering around brick-and-mortar stores recently, before walking away in disgust and just buying it on Amazon, I can't help but think Amazon is just spending to widen an already vast competitive edge. This isn't apples versus oranges. This is sailboat versus steamboat.
  - ippisl 15y ago
    When you buy a kindle fire , you get prime free for 30 days. after that, you need to subscribe. Yes, the 50% is high, but people who tried prime are really , really happy with it, so maybe 50% makes sense. And yes, it's definitely cars vs horses.
- joelhooks 15y ago
  And when they (we) are in store they break out the Amazon app, scan barcodes and have items shipped next day at a sizable discount over the store cost + sales tax.
firefoxman1 15y ago
Yeah, how about losing money on every book sold back when they started? It seemed to work for them.
- gujk 15y ago
  Amazon has never said no to paying a dollar of fixed overhead to generate $1.01 in lifetime marginal profit. Amazon is also willing to write down the first 5 years of a product's life as overhead. That is JeffB's genius (along with the ability to get the accounting right on these razor thin margins).
nobody3141 15y ago
Given that it's specs aren't much more than $100 chinese Android 2.3 tablets I doubt they are losing anything. Especially since they don't have a retailer taking 30% Their policy for the other Kindles was to recover the R&D initially and then sell them at not much more than cost.
vidar 15y ago
I was just doing the numbers on my 6 month old Kindle: 250 dollars spent on books since then, I wouldnt worry about device losses.
danssig 15y ago
Apple, if you're listening, I've got an idea! First, you need to prove beyond any doubt that the Fire is being sold at a loss. Once you know this, set up some dummy stores and invest the billions of dollars you have laying around in buying as many as you can. Once you have them, put them all in a compactor. Make sure each one is destroyed without anyone having laid a finger on it. See how long Amazon can sell these things at a loss without making anything from them.
- ceejayoz 15y ago
  Apple's cash-on-hand is nearly as much as Amazon's total market cap. If they wanted to take out Amazon, there are much easier ways.

jonnathanson 15y ago

Back in the day, "heavy spending on warehouses, data centers, and digital content offerings" would be labeled what it is: plowback. The company is reinvesting some of its earnings back into the business, rather than using those profits simply to reward shareholders. It's a long-term move, and Wall Street analysts these days seem wholly incapable of thinking further out than a quarter or two.