It appears that I cannot speak favorably about Amazon (NASDAQ:AMZN) without offending those who are long Apple (NASDAQ:AAPL). I suppose speaking in a positive light about the competition not only immediately forfeits one’s VIP pass to the local Apple store, but also his right to talk about the company. The fact of the matter is, I own Apple shares and frankly I don’t know of a safer bet in the market at the moment. But we can move beyond hating the competition. While it does absolutely no bit of good, it only serves to increase the size of the blinders that we sometimes wear as investors.
In a recent article, I discussed how Amazon is no longer satisfied with being second fiddle to Apple. Name a company that is content with being No. 2 and I will point to you a CEO who deserves to be fired. Being “second” in any desirable category is never a founding component of any corporate mission – unless you’re Research In Motion (RIMM). That was an unwarranted jab, I know. But it’s too late for me to take it back. Still, the point remains, going into 2012, we need to learn to love the competition, or at the very least respect it.
For a company such as Amazon, which revolutionized the antiquated idea of big-box retail, survived the dot.com bubble and placed (what should be) a capital “E” in ecommerce, it is not getting much respect. I have always appreciated that it is hated by both fans of Wal-Mart (NYSE:WMT) and Best Buy (NYSE:BBY) for the obvious reasons. But remarkably, it has now drawn the ire of the Apple faithful.
On the heels of its announcement to enter the tablet market with its Kindle Fire, investors immediately got a glimpse of just how receptive consumers would be to the idea. In an article by Seeking Alpha contributor Erick Schonfeld we learned the extent of this reception:
- The Kindle Fire looks like a bona fide hit right out of the gate. New estimates from IHS iSuppli have Amazon.com shipping 3.9 million Kindle Fires this quarter, which would make it the No. 2 tablet after the iPad 2 (with an estimated 18.6 million shipments). The Kindle Fire will become the No. 1 Android tablet by a wide margin (the Samsung (OTC:SSNLF) Galaxy Tab is the next biggest, with an estimated 1.4 million shipments).
- To put this 3.9 million number in context, just remember that the very first quarter Apple sold the iPad back in the September quarter of 2010, it sold 3.3 million. So the Kindle Fire sold more in its first quarter than the iPad did in its first quarter on the market. Of course, Apple sold 7.3 million iPads the second quarter it was on the market, which was the 2010 holiday quarter.
The possibility of the points above triggered some anger toward Amazon by Apple fans as in the example below. The commenter painted the company with a brush that would confuse it with Netflix (NASDAQ:NFLX) or RIM. And speaking of which, it seems that its recent entry into streaming movies with its Prime service certainly took a bite out of Netflix's subscriber numbers. So it astonishes me that anyone would continue to underestimate its ability to execute.
What the commenter failed point out is that in its Q3 results, Amazon reported 44% growth in revenue and a 37% increase in organic revenue. It reported growth in media of 24%, during which it saw a 21% increase in media sales from North America. I would not consider this performance a declining trend. This goes to another point raised by a reader who suggested the following:
It appears that very few thought the Kindle Fire would have this type of impact, if any impact at all. Seeing as RIM’s PlayBook failure and Hewlett-Packard’s (NYSE:HPQ) indecisiveness about its own tablet strategy caused many to think there was no clear cut No. 1 contender to the iPad - nobody asked Amazon’s CEO Jeff Bezos for his opinion on the matter, until he gave it. Now according to iSuppli its tablet could easily surpass all other tablets in this current fourth quarter to immediately make it the No. 2 selling tablet on the market.
With a current share of 66%, iSuppli also suggested that Apple will continue to be the market leader by a decent margin. So if you are a shareholder in Amazon, would you be content with playing second fiddle to anyone?
I get it, respecting the competition is (at times) a bitter pill to swallow. But it has more than proven that over time it becomes “good medicine” for astute investors. There is no doubt that Amazon will continue to dominate the ecommerce space for many years to come. But clearly it now demonstrates a track record for innovation and risk taking that rivals that of Apple. It is not content with being No. 2, nor should it be. Not only is this a good thing for Amazon shareholders, it will certainly prove to be a great thing as well for consumers.
Disclosure: I am long AAPL.