Amazon's Profitable Q2: Is It Bigger Than Wal-Mart? - InformationWeek

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7/27/2015
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Amazon's Profitable Q2: Is It Bigger Than Wal-Mart?

Amazon's second-quarter earnings showed a small but unexpected profit. Some say the company is now worth more than the world's biggest brick-and-mortar retailer.

registered as a 20% gain over the previous year. With no change in the dollar they would have represented a 27% gain.

The stock surge is powered by a broad band of investors who believe Amazon is reinventing retailing on its own innovative infrastructure, and will own an increasing share of retail sales around the world. Skeptics say it's investing in too many products, as well as retail systems, and no one can succeed on as many fronts as Amazon has chosen to pursue.

It's the old debate over Bezos' leadership. Does the company know what it's doing for the long haul, or is it over-investing in future profits that will never arrive? Judging by the stock price, current investors are sticking with Bezos and his team as they keep enlarging their pool of Prime buyers, their offerings of available goods and services, and their ability to execute quick deliveries.

Says Mulpuru-Kodali: "I don't see them ever being substantially more profitable than they are now, but its shareholders haven't seemed to care. In fact, Jeff Bezos is gunning to be a $200 billion [company] and has told people that he'd rather be big with small margins than small with big margins."

"Anyone who thinks there are Google-like margins in Amazon is kidding themselves, but so long as they keep kidding themselves, Amazon will absolutely sustain its valuation," she wrote.

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive ... View Full Bio

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GAProgrammer
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GAProgrammer,
User Rank: Ninja
7/31/2015 | 3:40:12 PM
Market capitalization
Definition:  the total dollar market value of the shares outstanding of a publicly traded company; it is equal to the share price times the number of shares outstanding.

Aka - all it takes is a downward stock value for this to change for Amazon. Every company that is measured this way is one bad PR event (like the Prime Day debacle) away from devaluation. Don't read too much into these tech articles that "X is bigger than Y because of market cap." They make good headlines, but horrible investing advice. Retail dollars and profitability are where the rubber meets the road and where WalMart slaughters Amazon.

As for investors tolerating zero profitability - Bezos & Co already had to back away from statements about not caring about profitability, precisely because of investors. Be careful when reading articles like this that the author hasn't cherry-picked comments just to make a point.
Angelfuego
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Angelfuego,
User Rank: Ninja
7/27/2015 | 8:37:31 PM
Re: Amazon
This doesn't surprise me. I assumed Amazon surpasssed Walmart a few years ago. I love Amazon and shop on their website regularly. I also think Amazon gift cards are a great gift!
Angelfuego
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Angelfuego,
User Rank: Ninja
7/27/2015 | 8:37:31 PM
Re: Amazon
This doesn't surprise me. I assumed Amazon surpasssed Walmart a few years ago. I love Amazon and shop on their website regularly. I also think Amazon gift cards are a great gift!
CharlesB554
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CharlesB554,
User Rank: Apprentice
7/27/2015 | 1:18:43 PM
Amazon
Malpuru-Kodali is saying Bezos wants to build a giant, dominant company of the future, not a highly profitable one. I think he's doing that. At some point, when a second generation of management comes in, they'll be able to figure out how to make it profitable, given the foundation that Bezos & Co. have built. "Amazon's earnings are about zero and will be into the foreseeable future," she says. Yes, and it sales keep growing and even its infrastructure, the AWS cloud, is proving to be profitable. I think Amazon wastes a lot of money trying to become a major player in tablets and cell phones. But that's the price of this expansionist outlook. And many investors have decided they want a piece of a dominant company of the future, profits or no profits.
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