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Att made around a 12% profit margin, which seems reasonable if a bit high. Would you consider 12% == “printing money”? I usually think of 25+% margins like in b

Att made around a 12% profit margin, which seems reasonable if a bit high. Would you consider 12% == “printing money”? I usually think of 25+% margins like in big tech that way. Not arguing just trying to understand how much money these companies are actually making.

darkwizard42 3y ago
12% in perpetuity with no stress the number will go down and lots of (imho insidious and customer unfriendly) ways for it to go up is in fact "printing money" Being able to make money risk free without risk of competition always ends up being worse for the customer and bad for the overall economy (in terms of efficiency)
- simfree 3y ago
  This is why AT&T keeps looking for the next big thing that will net them double digit margins in perpetuity with minimal effort. They have bought and damaged the following assets in pursuit of this goal: DirecTV, HBO, CNN, Cartoon Network, Warner Bros and more. AT&T has terribly mismanaged and damaged these assets, from destroying their carriage agreements with Dish and other cable companies for HBO, reducing their revenue by hundereds of millions a year, to, to more than halving the value if DirecTV by destroying its value proposition and failing to retain the customer base.
PaulDavisThe1st 3y ago
Compared to what? Food retail is generally at 2% ...
- fsckboy 3y ago
  food retail margins are 2% every time they turn over their inventory, which if they manage it properly can be much less than a month. so that 2% is annualized via a large multiplier the margins for telecoms are considered on an annual basis.
  - PaulDavisThe1st 3y ago
    Sorry, I don't understand. Are you saying that gross revenues for food retail are higher, and thus 2% of <a huge number> is bigger than 12% of <a smaller number> ?
    - fsckboy 3y ago
      if you buy broccoli and sell it a few days later at a 2% profit (net of costs), you just made 2%. if that took you a week, and you do it again the next week, and the week after that, you took your investment and grew it 52 weeks @ 2% a week, you'd be at 280% or more than 180% profit (1.02 ^ 52, presuming you also buy and sell 2% more of the broccoli itself every week. if you just buy the same amount of broccoli every week that's just 52 * .02 plus a little for interest, and you take the profits and pay off debts or take it as income, etc.) if you lay fiber and connect it to the internet and hire cable guys to visit people's houses and customer service people to answer the phone, and your total revenue for a year minus your costs for a year comes out to a profit margin of 50%, you have 50% margins.
      - frumper 3y ago
        If you buy broccoli for $1.00 and sell it in a week for $1.02 you’ve made 2%. If you buy another broccoli for $1.00 and sell it again for $1.02 then you’re still at a 2% profit for the year. You’ve spent $2 on inventory with revenue of $2.04, for a total profit margin of 2%. This is obviously simplified.
        fsckboy 3y ago
        the piece of corporate finance you are missing is that the money you use to buy the broccoli is scarce, you have to "pay" for it. you can't leave it out of the calculation. You pay for it to who you borrowed it from, or to your shareholders, or the opportunity cost of taking it out of whatever use somebody else was paying you for. that dollar you use to buy the broccoli, it's like a machine you use to knit sweaters. If you put that dollar to use for a year and sell one broccoli, you made 2%. If you put that same-single-dollar to use for a year and sell 52 broccolis, you made more. what I originally said was that you can't just look at the margin on a sale, you need to look at inventory turn, how many times you collect the margin. what makes the margin low is competition. a grocer is willing to accept a 2% margin on a sale because the cycle can be repeated many times in a year. In a sense, the interest rate (which is quoted at annual rates) on the borrowed dollar is fixed at that annual rate, but if you get to cycle through your operating capital quickly, you get to look at it as the amount of interest you need to pay each week.
creer 3y ago
It's not a "big tech" product. It's an infrastructure product. A public utility. With (if they don't mess up) life-long subscription customers. With essentially zero risk (aside from infrastructure risk: earthquakes, upgrade cycles.)

darkwizard42 3y ago

12% in perpetuity with no stress the number will go down and lots of (imho insidious and customer unfriendly) ways for it to go up is in fact "printing money" Being able to make money risk free without risk of competition always ends up being worse for the customer and bad for the overall economy (in terms of efficiency)

simfree 3y ago
This is why AT&T keeps looking for the next big thing that will net them double digit margins in perpetuity with minimal effort. They have bought and damaged the following assets in pursuit of this goal: DirecTV, HBO, CNN, Cartoon Network, Warner Bros and more. AT&T has terribly mismanaged and damaged these assets, from destroying their carriage agreements with Dish and other cable companies for HBO, reducing their revenue by hundereds of millions a year, to, to more than halving the value if DirecTV by destroying its value proposition and failing to retain the customer base.

PaulDavisThe1st 3y ago

Compared to what? Food retail is generally at 2% ...

fsckboy 3y ago
food retail margins are 2% every time they turn over their inventory, which if they manage it properly can be much less than a month. so that 2% is annualized via a large multiplier the margins for telecoms are considered on an annual basis.
- PaulDavisThe1st 3y ago
  Sorry, I don't understand. Are you saying that gross revenues for food retail are higher, and thus 2% of <a huge number> is bigger than 12% of <a smaller number> ?
  - fsckboy 3y ago
    if you buy broccoli and sell it a few days later at a 2% profit (net of costs), you just made 2%. if that took you a week, and you do it again the next week, and the week after that, you took your investment and grew it 52 weeks @ 2% a week, you'd be at 280% or more than 180% profit (1.02 ^ 52, presuming you also buy and sell 2% more of the broccoli itself every week. if you just buy the same amount of broccoli every week that's just 52 * .02 plus a little for interest, and you take the profits and pay off debts or take it as income, etc.) if you lay fiber and connect it to the internet and hire cable guys to visit people's houses and customer service people to answer the phone, and your total revenue for a year minus your costs for a year comes out to a profit margin of 50%, you have 50% margins.
    - frumper 3y ago
      If you buy broccoli for $1.00 and sell it in a week for $1.02 you’ve made 2%. If you buy another broccoli for $1.00 and sell it again for $1.02 then you’re still at a 2% profit for the year. You’ve spent $2 on inventory with revenue of $2.04, for a total profit margin of 2%. This is obviously simplified.
      - fsckboy 3y ago
        the piece of corporate finance you are missing is that the money you use to buy the broccoli is scarce, you have to "pay" for it. you can't leave it out of the calculation. You pay for it to who you borrowed it from, or to your shareholders, or the opportunity cost of taking it out of whatever use somebody else was paying you for. that dollar you use to buy the broccoli, it's like a machine you use to knit sweaters. If you put that dollar to use for a year and sell one broccoli, you made 2%. If you put that same-single-dollar to use for a year and sell 52 broccolis, you made more. what I originally said was that you can't just look at the margin on a sale, you need to look at inventory turn, how many times you collect the margin. what makes the margin low is competition. a grocer is willing to accept a 2% margin on a sale because the cycle can be repeated many times in a year. In a sense, the interest rate (which is quoted at annual rates) on the borrowed dollar is fixed at that annual rate, but if you get to cycle through your operating capital quickly, you get to look at it as the amount of interest you need to pay each week.

creer 3y ago

It's not a "big tech" product. It's an infrastructure product. A public utility. With (if they don't mess up) life-long subscription customers. With essentially zero risk (aside from infrastructure risk: earthquakes, upgrade cycles.)