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> Amazon would absolutely be more valuable broken up That is total nonsense, completely irrelevant, and true. Conglomerates being worth less than the sum of a

by sofixa 4y ago

> Amazon would absolutely be more valuable broken up That is total nonsense, completely irrelevant, and true. Conglomerates being worth less than the sum of all parts is one of the stupidest parts of Wall Street. There is no actual rationale for this besides maybe it being easier to evaluate a company doing only a single thing? Specifically with regards to the examples given - Amazon, Meta, Google - it's the cross-subsidising and reuse of stuff that makes them profitable. Prime video without AWS' cache isn't a great competitor to Disney; YouTube on it's own will have a ruinous infrastructure bill that is subsidised by Google now; WhatsApp doesn't make money so can only survive on someone else's dime, etc. etc. Same goes for traditional conglomerates - of course GE were stronger before they split up into three. What will GE Aerospace do next time there's an air travel downturn like a pandemic? Crash and burn unless it has enough reserves, because it won't have the benefit of being propped up by different businesses that aren't impacted (like say GE HealthCare). Bombardier today are in a much worse spot, focusing only on a minuscule and volatile niche (private jets), but at least in their case it wasn't their choice, Boeing bankrupted them with protectionist tricks. The real reasons to split them up would be to improve competition and the choice of consumers, not because "idiot investors think 'value' will go up".

conductr 4y ago
Would customers pay for Amazon services individually if they were unbundled? I’m guessing there would be significant drop off. Prime Video would implode. Subscription revenue wouldn’t be sufficient to fund content and it’s a short life from there.
SilverBirch 4y ago
It's pretty wild that your example of a good conglomerate is GE considering GE's a perfect of example of why conglomerates don't work. Gee I sure wish I could invest in that great GE Aerospace division, too bad if I do the jokers over at GE Capital are going to snort half of it and place the rest on black. GE was the notorious exception to conglomerates being terrible right up until it also turned into a massive shit show.
jefftk 4y ago
> Conglomerates being worth less than the sum of all parts is one of the stupidest parts of Wall Street. There is no actual rationale for this besides maybe it being easier to evaluate a company doing only a single thing? One example: some parts of a business need a positive consumer reputation and others don't. When you connect these under the same company you may end up with two business units that are each less valuable than if they were free to take the approach that best suited their business. For example, an ad company that didn't care much what consumers thought about it would use fingerprinting to personalize ads and it's prevalent in the industry, but Google committed to not doing this. Why? My guess is that a big part was reputation: having an ads division that's tracking users with no opt out is inconsistent with the company-wide policies Google needs to be competitive in consumer markets. In this case I think the effects are positive, in that the display ads division is closer to what consumers would want than if it were independent, but I think it's pretty likely that spinning DoubleClick back out would increase overall profits. (I used to work at Google, and here I'm speculating about decisions made several levels above me that I wasn't a part of.)

by sofixa 4y ago

conductr 4y ago

Would customers pay for Amazon services individually if they were unbundled? I’m guessing there would be significant drop off. Prime Video would implode. Subscription revenue wouldn’t be sufficient to fund content and it’s a short life from there.

SilverBirch 4y ago

It's pretty wild that your example of a good conglomerate is GE considering GE's a perfect of example of why conglomerates don't work. Gee I sure wish I could invest in that great GE Aerospace division, too bad if I do the jokers over at GE Capital are going to snort half of it and place the rest on black. GE was the notorious exception to conglomerates being terrible right up until it also turned into a massive shit show.

jefftk 4y ago

> Conglomerates being worth less than the sum of all parts is one of the stupidest parts of Wall Street. There is no actual rationale for this besides maybe it being easier to evaluate a company doing only a single thing? One example: some parts of a business need a positive consumer reputation and others don't. When you connect these under the same company you may end up with two business units that are each less valuable than if they were free to take the approach that best suited their business. For example, an ad company that didn't care much what consumers thought about it would use fingerprinting to personalize ads and it's prevalent in the industry, but Google committed to not doing this. Why? My guess is that a big part was reputation: having an ads division that's tracking users with no opt out is inconsistent with the company-wide policies Google needs to be competitive in consumer markets. In this case I think the effects are positive, in that the display ads division is closer to what consumers would want than if it were independent, but I think it's pretty likely that spinning DoubleClick back out would increase overall profits. (I used to work at Google, and here I'm speculating about decisions made several levels above me that I wasn't a part of.)