5 ms·

“Think Profit.”

48 points by FluidDjango 15y ago

Zakuzaa 15y ago
Can someone with knowledge explain to me why is AAPL's P/E 12.99 and AMZN's 130.72? Source: Google Finance.
- fraserharris 15y ago
  Investors don't believe AAPL can appreciate significantly more than it is already valued. A mature blue-chip stock has a P/E ratio of 8 - 12. More generally, it is really hard to compete with AMZN, because they maintain such narrow margins. AAPL relies on continued (hit-generating) innovation which is prone to distruption.
  - rimantas 15y ago
    > AAPL relies on continued (hit-generating) innovation > which is prone to distruption. And as history shows, the disruptor is Apple itself.
    - pagekalisedown 15y ago
      The uncertainty now is that they don't have Steve Jobs. I hope, for Apple's sake, they don't become Steve Ballmer's Microsoft.
      - rimantas 15y ago
        iPhone was introduced after 2,5 years since inception. I guess they have some stuff in pipeline for some years to come, also (I hope) the culture is still there.
- vannevar 15y ago
  One possible contributor is Amazon Web Services. The revenue from AWS is currently hidden under 'other' in the company's earnings reports, but analysts believe it comprises most of that category, which totaled over $500M this quarter, a 58% increase over Q4 last year. That means AWS was close to a billion dollar business in 2011 and will certainly surpass that in 2012. Besides being an even faster-growing market than online retail, it's likely that the AWS margins are higher than retail as well.
  - wwwhizz 15y ago
    Also, Amazon makes a lot (and I mean a LOT)of their profit/revenue in smaller websites and companies: http://ripetungi.com/wp-content/uploads/2009/12/amazon-companies.png http://ripetungi.com/wp-content/uploads/2009/12/amazon-compa...
x3c 15y ago
Article is off base. Telling corporations to think about profit is like telling someone to think about breathing. It's always in Corporation's mind to think of profits. What differs here is the strategy. Profit in the long term compared to profit in the short term. Apple is in a unique position to achieve one without compromising the other. But Amazon is not in that position. Majority of their business is reselling products, they need to make sure their platform is best at reselling products. Kindles are not the products they're selling, it is a platform they're using to sell products. So, they're investing in platforms that will keep users loyal to the company and be a preferred destination for buying things. One can always analyze if this strategy is good for it's intended purpose or not, but that analysis is no part of the article. Discussion on this strategy is worthwhile. Comparison with Walmart, to some extent, is fair. But brick and mortar sellers face very different challenges than the virtual shopping platform like Amazon. EDIT: By "reselling product" I meant to convey "selling other people's products". Not the best choice of words.
jasin 15y ago
The juxtaposition between hardware being the loss-leader over software, and vice versa, is interesting. The article states that "clearly one model is working and one isn't". I'm not sure if this is really the case. For example, in the games console business, the devices were loss-leaders for a long time, but at least Microsoft is now doing more than OK with its Xbox business - granted it took a while to get there. So, over time, loss-leader hardware isn't necessarily a bad strategy.
mathattack 15y ago
Interesting article. It basically cover loss leaders. Not news, but perhaps it was to apple. HP gives away printers to sell ink. Safeway cuts the price of bananas to 30 cents a pound so you'll buy overpriced oranges. It appears the same with Amazon and the Kindle. It's possible to make a great product, but lose money with poor strategic positioning. What makes Apple so much money is they nailed BOTH the product and the business model that allows them to make money. It seems clear the business model mindset is there to stay. Will the product revolution continue? This is one reason the P/E is closer to that of a more mature company.

“Think Profit.”

48 points by FluidDjango 15y ago

Zakuzaa 15y ago

Can someone with knowledge explain to me why is AAPL's P/E 12.99 and AMZN's 130.72? Source: Google Finance.

fraserharris 15y ago
Investors don't believe AAPL can appreciate significantly more than it is already valued. A mature blue-chip stock has a P/E ratio of 8 - 12. More generally, it is really hard to compete with AMZN, because they maintain such narrow margins. AAPL relies on continued (hit-generating) innovation which is prone to distruption.
- rimantas 15y ago
  > AAPL relies on continued (hit-generating) innovation > which is prone to distruption. And as history shows, the disruptor is Apple itself.
  - pagekalisedown 15y ago
    The uncertainty now is that they don't have Steve Jobs. I hope, for Apple's sake, they don't become Steve Ballmer's Microsoft.
    - rimantas 15y ago
      iPhone was introduced after 2,5 years since inception. I guess they have some stuff in pipeline for some years to come, also (I hope) the culture is still there.
vannevar 15y ago
One possible contributor is Amazon Web Services. The revenue from AWS is currently hidden under 'other' in the company's earnings reports, but analysts believe it comprises most of that category, which totaled over $500M this quarter, a 58% increase over Q4 last year. That means AWS was close to a billion dollar business in 2011 and will certainly surpass that in 2012. Besides being an even faster-growing market than online retail, it's likely that the AWS margins are higher than retail as well.
- wwwhizz 15y ago
  Also, Amazon makes a lot (and I mean a LOT)of their profit/revenue in smaller websites and companies: http://ripetungi.com/wp-content/uploads/2009/12/amazon-companies.png http://ripetungi.com/wp-content/uploads/2009/12/amazon-compa...

x3c 15y ago

Article is off base. Telling corporations to think about profit is like telling someone to think about breathing. It's always in Corporation's mind to think of profits. What differs here is the strategy. Profit in the long term compared to profit in the short term. Apple is in a unique position to achieve one without compromising the other. But Amazon is not in that position. Majority of their business is reselling products, they need to make sure their platform is best at reselling products. Kindles are not the products they're selling, it is a platform they're using to sell products. So, they're investing in platforms that will keep users loyal to the company and be a preferred destination for buying things. One can always analyze if this strategy is good for it's intended purpose or not, but that analysis is no part of the article. Discussion on this strategy is worthwhile. Comparison with Walmart, to some extent, is fair. But brick and mortar sellers face very different challenges than the virtual shopping platform like Amazon. EDIT: By "reselling product" I meant to convey "selling other people's products". Not the best choice of words.

jasin 15y ago

The juxtaposition between hardware being the loss-leader over software, and vice versa, is interesting. The article states that "clearly one model is working and one isn't". I'm not sure if this is really the case. For example, in the games console business, the devices were loss-leaders for a long time, but at least Microsoft is now doing more than OK with its Xbox business - granted it took a while to get there. So, over time, loss-leader hardware isn't necessarily a bad strategy.

mathattack 15y ago

Interesting article. It basically cover loss leaders. Not news, but perhaps it was to apple. HP gives away printers to sell ink. Safeway cuts the price of bananas to 30 cents a pound so you'll buy overpriced oranges. It appears the same with Amazon and the Kindle. It's possible to make a great product, but lose money with poor strategic positioning. What makes Apple so much money is they nailed BOTH the product and the business model that allows them to make money. It seems clear the business model mindset is there to stay. Will the product revolution continue? This is one reason the P/E is closer to that of a more mature company.