Amazon.com Heads in Yet Another Direction But Wall Street is Skeptical

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Jeff Bezos' Risky Bet [Business Week]

Summary: This August, Amazon.com launched the test version of a new venture called Elastic Compute Cloud [EC2]. Hundreds of free sample versions of the service, which provides cheap, raw computing power that could be tapped on demand over the Internet just like electricity, were snapped up in a matter hours by web programmers and content managers eager to launch the next MySpace or YouTube. The goal, according to Amazon Founder and CEO Jeffrey Bezos is to become to the web what Microsoft became to the software industry: the standard-bearer upon whose platforms nearly every computer-based business runs. In addition to EC2, Amazon is renting out server space, data storage services and even physical warehouse space to potential competitors to its own $10.5 billion-a-year online retail portal. But while such moves seem logical to Bezos, Wall Street analysts covering the company feel the new services being offered by the company are nothing more than a distraction to its core business, and blame Bezos' lack of focus for Amazon's shrinking profit margins.
Related links: Google would-be slayer Powerset is using EC2 to provide CPU power and storage space for its natural language technology • Amazon.com Q3 2006 Earnings Call Transcript • Amazon's High Multiple Isn't Sustainable • Analysts Still Hate Amazon • Amazon Bulls, Calm Down • The Most Important Quote From Google's Conference Call
Potentially impacted stocks and ETFs: Amazon.com (AMZN), Google (GOOG) • First Tr DJ Internet Index FD (FDN), Internet HOLDRS (HHH)

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Comments

[Tom B:]

They have three core businesses: books, music and consumer electronics/small gifts. They do books and Consumer electronics pretty well, IMO. No real room for improvement. But their music business is flawed. I prefer CD's to downloaded MP3, and I suspect most people agree with me on this. But I can go to iTunes Music store and HEAR PREVIEWS of albums I might want to buy; there is no convenient way, after all these years, to do this on Amazon.com. This is a HUGE glaring weakness that they should fix pronto. On the plus side, you can get consumer reviews on Amazon, which you can't get on iTMS.

2006 Nov 06 03:55 PM