AMZN - Amazon.com Inc.

[rpadebet]

 

 

My issue with Amazon is growth related. I'm curious where you guys think the growth will come from? The US market is pretty tapped out, no? It's not like there's a state in the Union which has never heard of Amazon before. So is it a matter of pricing power in the US? I don't want to make an investment hinging on that. If the case is that they are the low-cost operator, raising prices defeats that purpose.

 

So you look either domestically to offering new services (which they have I suppose a 50/50 record with) or expanding retail internationally. I don't think the investment works if you're depending on Amazon to get into another line of business domestically which will dramatically move the needle. So you're really looking at international retail expansion.

 

How is everyone thinking about that? How will it be working with Euro/Asian delivery servicers? How competitive are those markets? How do those people shop? Population density in Europe and developed Asia is probably higher than in the US, I presume. Would retail-by-mail even work as well there? These are the questions holding me back.

 

LC,

Future growth doesn't necessarily have to come from new people discovering Amazon for the first time. Existing customers spending more can create its own growth. I personally "discovered" Amazon" about 15 years ago, but then I used it to buy only books. Then about 8 years ago i discovered I could use it buy electronics and later other things. Every year that goes by, the busier ( or lazier) i get, I tend to do more and more purchasing online. So their growth isn't like Twitter or Facebook where they need to find new users, growth in US and Europe will come from existing users. ECommerce for all the publicity it has received is still just a small portion of the entire retail market. That's the tail wind.

 

Secondly, developing countries are leap frogging the B&M retail model and getting to eCommerce directly. For example, I don't know of many super retail store chains in India for example at the scale of WMT or COST. They basically skipped that step going from mom and pop retail stores to eCommerce. That is why you have Amazon investing 2 billion there. Here you have a shot at "discovery" by new users.

[JAllen]

Good summary Rpadebet.  I would tend to agree with the classifications.  Google will be a factor if only due to the amount they have to spend on themselves, to get 3rd party revenues is just a plus for them.  I think MSFT will win most of the growing enterprise and big customer business.  IBM will play in the same space but probably specialize - likely healthcare, government, banking.  AMZN will own the low end - startups, developers, small business.

 

 

I'm not sure AWS will only own the low end, unless you consider the U.S. Federal Government and Apple low end.  AWS is doing quite well winning over literally the largest financial entities on the planet.  Netflix and Dropbox are two other large entities that use AWS that immediately come to mind.

 

 

The U.S. Govt. concluded AWS was technically superior to IBM last year and had more confidence in AWS.  See attached screenshot and court opinion, that is a must-read if you follow AWS or IBM at all.

 

 

http://readwrite.com/2014/08/26/apple-icloud-amazon-web-services-hosting

 

 

http://www.gao.gov/assets/660/655241.pdf

[JAllen]

You know you're not the lowest-priced competitor when...

Wal-Mart mulls matching Amazon’s and other online rivals’ prices

http://www.marketwatch.com/story/wal-mart-mulls-matching-amazons-and-other-online-rivals-prices-2014-10-30

[JAllen]

By the way, I built a financial news site, (It's not on AWS because the price is too high!, interestingly). 

 

 

You can check out the AMZN news feed by clicking here: http://stockbase.com/company/AMZN.  It's pretty diverse actually, which is the point of StockBase - to get all news in one place.

 

 

Don't worry, it's free and doesn't require any sign up, unless you want to create a portfolio, which is still free.

[dwy000]

Good summary Rpadebet.  I would tend to agree with the classifications.  Google will be a factor if only due to the amount they have to spend on themselves, to get 3rd party revenues is just a plus for them.  I think MSFT will win most of the growing enterprise and big customer business.  IBM will play in the same space but probably specialize - likely healthcare, government, banking.  AMZN will own the low end - startups, developers, small business.

 

 

I'm not sure AWS will only own the low end, unless you consider the U.S. Federal Government and Apple low end.  AWS is doing quite well winning over literally the largest financial entities on the planet.  Netflix and Dropbox are two other large entities that use AWS that immediately come to mind.

 

 

The U.S. Govt. concluded AWS was technically superior to IBM last year and had more confidence in AWS.  See attached screenshot and court opinion, that is a must-read if you follow AWS or IBM at all.

 

 

http://readwrite.com/2014/08/26/apple-icloud-amazon-web-services-hosting

 

 

http://www.gao.gov/assets/660/655241.pdf

 

I don't think they'll be solely low end but the other major players in this business (Microsoft & IBM) have massive corporate relationships which go hand in hand with cloud so I think AMZN will struggle to win these on anything other than price because their product offering isn't as broad. But there's no question they'll win some.  The Federal gov't contract was before IBM acquired SoftLayer.  Apple and Netflix are just storage customers - which is becoming a freebie giveaway.  I can't imagine Netflix sticking around much longer given Amazon is now one of their primary competitors.  I have to imagine that Apple's partnership with IBM would also see them move some of that business over. 

[JAllen]

What products do IBM and Azure offer that AMZN doesn't?

[JAllen]

The U.S. said IBM is technically inferior to AWS, which isn't unsurprising with cloud applications seeing as how AMZN has been running massive applications for 15 plus years now, and IBM has just been dabbling in it.

 

 

Evidently auto-scaling is important to government clients, and AWS is better than IBM at it, according to the team that compared AWS and IBM's proposals:

 

 

"In its evaluation of FPRs, the technical/management evaluation team assigned a

deficiency to IBM’s proposal under the demonstration element (within the technical

approach subfactor) as a result of language in the firm’s FPR that appeared to

indicate that its existing public cloud could not provide auto-scaling for applications

provided by the consumer. The technical/management evaluation team also

assigned a significant weakness under the written element of the technical

approach subfactor for IBM’s failure to make clear in its proposal how IBM would

modify its existing commercial cloud to provide the required auto-scaling capability

for the intelligence community. "

 

http://www.gao.gov/assets/660/655241.pdf

[valueinvestor82]

http://m.wsj.com/articles/wal-mart-weighs-matching-online-prices-during-holidays-1414672782?mobile=y&mod=WSJ_hp_LEFTWhatsNewsCollection

 

Walmart weighs matching amzn online prices.

 

Begin the bull spin in 3...2...1..

[Palantir]

  I have to imagine that Apple's partnership with IBM would also see them move some of that business over.

 

This is a very weak assumption. Why would they move an important cloud service from AWS and Azure, which work....to IBM? Just because Apple is using IBM as their enterprise salesforce doesn't mean Apple will turn to them as a provider.

[dwy000]

What products do IBM and Azure offer that AMZN doesn't?

 

ERP, applications, proprietary analytics - all of their other business offerings outside of cloud.  These are software companies that sell to the enterprise space.  AMZN is a retailer with a side business in hosting and storage.

[dwy000]

  I have to imagine that Apple's partnership with IBM would also see them move some of that business over.

 

This is a very weak assumption. Why would they move an important cloud service from AWS and Azure, which work....to IBM? Just because Apple is using IBM as their enterprise salesforce doesn't mean Apple will turn to them as a provider.

 

You're right, it's probably overly strong to say they will move everything to IBM.  But not unreasonable to assume that, after so publicly announcing their partnership to target enterprises, much of the business would head in that direction

[rpadebet]

  I have to imagine that Apple's partnership with IBM would also see them move some of that business over.

 

This is a very weak assumption. Why would they move an important cloud service from AWS and Azure, which work....to IBM? Just because Apple is using IBM as their enterprise salesforce doesn't mean Apple will turn to them as a provider.

 

You're right, it's probably overly strong to say they will move everything to IBM.  But not unreasonable to assume that, after so publicly announcing their partnership to target enterprises, much of the business would head in that direction

 

IBM has spent its cash flows buying back their stock. They will have a hard time matching or coming close to AMZN's scale. It will take years of investment to leverage their existing relationships.  That is why MSFT seems to be best placed with the massive cash hoard, cash flow, software experience, developer network and enterprise relationships.

[Palantir]

Yep, I think MSFT is the biggest threat, it is the one that has long term enterprise like relationships like IBM, willingness to invest heavily in the cloud like AMZN, and the mountain of cash to pay for it....

 

My expectation though is that AMZN will continue to lead the public cloud, while I think MSFT may have the edge in building hybrid/private clouds for enterprises...

[rpadebet]

The part of Jeff Bezos strategy I don't understand is his investments in Media and competition with NFLX. If he wanted AMZN to be in streaming video and content, why didn't he just buy NFLX in 2012 at 5-6 bill and get done with it? He has been spending/investing tons in replicating their service now and I am not sure AMZN still has the traction there..They clearly had AWS synergies there.

 

Right now, I don't understand why he doesn't go and buy BBRY for 5-6 bill. He gets into the mobile space which he seems to covet and more importantly for AWS, he gets the enterprise relationships which is the missing piece in the AWS strategy.

 

 

[rkbabang]

The part of Jeff Bezos strategy I don't understand is his investments in Media and competition with NFLX. If he wanted AMZN to be in streaming video and content, why didn't he just buy NFLX in 2012 at 5-6 bill and get done with it? He has been spending/investing tons in replicating their service now and I am not sure AMZN still has the traction there..They clearly had AWS synergies there.

 

Right now, I don't understand why he doesn't go and buy BBRY for 5-6 bill. He gets into the mobile space which he seems to covet and more importantly for AWS, he gets the enterprise relationships which is the missing piece in the AWS strategy.

 

 

Both good questions.  They should have bought Netflix when they had the chance (Amazon isn't the only company you could say should have bought Netflix when they had the chance), but now they shouldn't bother with it at all.  Neither the streaming video nor the smartphone strategy makes any sense to me.  I have no idea why Amazon is even in these markets which require huge capital investments and where they have no advantage nor any chance in hell of competing against Apple, Samsung, Netflix, ...  And it looks like they aren't giving up the phone idea yet.

 

http://techcrunch.com/2014/10/31/amazons-fire-phone-product-efforts-will-continue-despite-early-stumbles/

 

This is all money that would be better spent on its retail or cloud businesses, or not spent at all.

[rkbabang]

They are now offering free unlimited cloud photo storage for Prime members.  This is a pretty good benefit.  I have thousands of family photos  since my kids were small on my computer.  Right now I keep them in 3 different places on 3 different hard disks, but I have no offsite backup.  If I ever had a fire all would be lost.  I've thought about paying for cloud storage to back them up, as I've got way too many to fit in any of the free storage levels, but now I don't have to.

 

https://smile.amazon.com/clouddrive/primephotos/

 

[Jurgis]

They are now offering free unlimited cloud photo storage for Prime members.  This is a pretty good benefit.  I have thousands of family photos  since my kids were small on my computer.  Right now I keep them in 3 different places on 3 different hard disks, but I have no offsite backup.  If I ever had a fire all would be lost.  I've thought about paying for cloud storage to back them up, as I've got way too many to fit in any of the free storage levels, but now I don't have to.

 

https://smile.amazon.com/clouddrive/primephotos/

 

 

Off topic: Flickr offers free terabyte of photo storage. That's where my photos are now. I doubt that you'd exceed that.

[rkbabang]

They are now offering free unlimited cloud photo storage for Prime members.  This is a pretty good benefit.  I have thousands of family photos  since my kids were small on my computer.  Right now I keep them in 3 different places on 3 different hard disks, but I have no offsite backup.  If I ever had a fire all would be lost.  I've thought about paying for cloud storage to back them up, as I've got way too many to fit in any of the free storage levels, but now I don't have to.

 

https://smile.amazon.com/clouddrive/primephotos/

 

 

Off topic: Flickr offers free terabyte of photo storage. That's where my photos are now. I doubt that you'd exceed that.

 

No, no where near that. I probably have less than 40GB, but I didn't know about Flickr's offering, I thought Flickr was just a site to share your photos online and make them public.  I'll probably use Amazon now though.

 

[rpadebet]

More 3P sales

http://www.businessinsider.com/amazon-prime-shopping-perks-on-other-sites-2014-11

 

Cloud price wars continue

http://seekingalpha.com/news/2091655-google-continues-cloud-war-against-amazon-with-price-cuts-new-features

 

 

[dwy000]

They are now offering free unlimited cloud photo storage for Prime members.  This is a pretty good benefit.  I have thousands of family photos  since my kids were small on my computer.  Right now I keep them in 3 different places on 3 different hard disks, but I have no offsite backup.  If I ever had a fire all would be lost.  I've thought about paying for cloud storage to back them up, as I've got way too many to fit in any of the free storage levels, but now I don't have to.

 

https://smile.amazon.com/clouddrive/primephotos/

 

 

Off topic: Flickr offers free terabyte of photo storage. That's where my photos are now. I doubt that you'd exceed that.

 

No, no where near that. I probably have less than 40GB, but I didn't know about Flickr's offering, I thought Flickr was just a site to share your photos online and make them public.  I'll probably use Amazon now though.

If you subscribe to Microsoft Office you get unlimited online storage through OneDrive.

[rkbabang]

They are now offering free unlimited cloud photo storage for Prime members.  This is a pretty good benefit.  I have thousands of family photos  since my kids were small on my computer.  Right now I keep them in 3 different places on 3 different hard disks, but I have no offsite backup.  If I ever had a fire all would be lost.  I've thought about paying for cloud storage to back them up, as I've got way too many to fit in any of the free storage levels, but now I don't have to.

 

https://smile.amazon.com/clouddrive/primephotos/

 

 

Off topic: Flickr offers free terabyte of photo storage. That's where my photos are now. I doubt that you'd exceed that.

 

No, no where near that. I probably have less than 40GB, but I didn't know about Flickr's offering, I thought Flickr was just a site to share your photos online and make them public.  I'll probably use Amazon now though.

If you subscribe to Microsoft Office you get unlimited online storage through OneDrive.

 

Sure, but who uses Office at home anymore?  I have an old home version of Office that is probably from 2007 or so I think.  There is no need to ever update it or subscribe.  But even if I didn't have it, the free office tools (Google docs and/or LibreOffice) would suffice.

 

[rkbabang]

Amazon.com has a new device: The Amazon Echo.  I'm not sure what to make of it.  Music player(I wonder how it sounds), alarm clock, ask questions of it like Siri, ...  Sounds like a smartphone (with external speakers attached maybe for music) can do all of those things just as well.

 

http://smile.amazon.com/oc/echo/

 

[JAllen]

Board Canadians should be happy about this:

 

http://www.internetretailer.com/mobile/2014/11/06/amazons-same-day-delivery-expands-canada

 

http://recode.net/2014/11/06/livingsocial-lays-off-400-eyes-changes-to-amazon-relationship/

 

 

Amazon has tested deliveries using taxis in SF.  This is really interesting.  Hope the results were encouraging.

http://m.wsj.com/articles/amazon-testing-taxis-for-deliveries-1415209630?mobile=y

 

Good reference to current Fire Phone ails is the first Kindle: "If you look at version one of the Kindle e-reader it was pretty bad, like the reviews we received on it. But we said we’re going to keep going, keep investing and do this eventually."

http://recode.net/2014/11/06/codered-second-amazon-fire-phone-may-not-suck-as-badly-as-first/

 

All from http://stockbase.com/company/AMZN

[Liberty]

Good reference to current Fire Phone ails is the first Kindle: "If you look at version one of the Kindle e-reader it was pretty bad, like the reviews we received on it. But we said we’re going to keep going, keep investing and do this eventually."

http://recode.net/2014/11/06/codered-second-amazon-fire-phone-may-not-suck-as-badly-as-first/

 

Kindle isn't exactly just getting good reviews despite the years in development:

 

http://www.marco.org/2014/11/05/kindle-voyage-review

[JAllen]

Good reference to current Fire Phone ails is the first Kindle: "If you look at version one of the Kindle e-reader it was pretty bad, like the reviews we received on it. But we said we’re going to keep going, keep investing and do this eventually."

http://recode.net/2014/11/06/codered-second-amazon-fire-phone-may-not-suck-as-badly-as-first/

 

Kindle isn't exactly just getting good reviews despite the years in development:

 

http://www.marco.org/2014/11/05/kindle-voyage-review

 

 

Of course there are some people that don't like each model.  You can see each model's reviews here:

 

 

http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=kindle

 

 

The reviews are overwhelmingly positive.  I don't think AMZN could sell 40% of e-books if they didn't, on average, like Kindles.