I'm a big Apple (AAPL) fan. I'm also a big Amazon.com (AMZN) fan. I like both stocks. I love both companies. According to my Seeking Alpha colleague Cameron Kaine, that makes me something like a freak of nature:
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.
I almost completely agree with what Kaine says there. The part where we diverge, however, involves the notion of Apple and Amazon as direct and fierce competitors. While the two companies clearly compete on some level, I don't think it's as direct of a battle as most of the financial media makes it out to be. That said, from a symbolic standpoint, I think Amazon stands a good chance of displacing Apple as "America's Company."
At good start-ups, employees, from the top down, have tunnel vision. You don't hear much from them. They have their heads down, working toward many objectives and ultimate goals that they'll probably never realize. There's always more work to do. It can be a difficult professional existence that can wreak havoc on personal lives.
I think Apple and Amazon still have quite a bit of that start-up spirit in their blood. Great companies never lose it no matter how big they become. While these types of companies often compete fiercely and openly with one another, a more classy and quiet competition sometimes ensues. I think that is what's happening right now between Apple and Amazon. Each company knows that something big is playing itself out on the battlefield, but the strategies they undertake, as conceived and executed, really have very little to do with the other's day-to-day moves or overall gameplan.
Simply put, I don't think Apple's name comes up much in the halls in Seattle. And Tim Cook surely isn't ransacking cubicles in Cupertino, losing his mind over Amazon's recent moves. Instead, mutual respect and admiration exists between the two companies.
Not Direct Competition
The easy story positions Kindle Fire as a salvo fired by Jeff Bezos not only at iPad, but at Tim Cook's penthouse suite. Kindle's incredible sales numbers out of the gate only add fuel to the barbecue that iPad finally has a serious contender that, if the early trend continues, could outsell the world's top-selling tablet.
Here's the deal. Amazon put out a tablet because that was the sensible thing to do. If it thought it could do a better job extending its brand and its reach and driving its e-commerce core by developing an electric car or an interactive shaver, it would have done that. Thanks to Apple, tablets are all of the rage. As such, it's the obvious means to achieve Amazon's ever-growing end.
Amazon is not dumb enough to fire a missile at Apple. Just look at Kindle Fire. It's a nice, little device. I'll have one under my family's Christmas tree this year, but it's clearly inferior to iPad. Again, it's a slim and sensible means to an end. If it happens to ding iPad, that's an indirect, unintended hit. Call it collateral damage.
It's such a basic premise. All Amazon wants to do is sell you stuff. It wants you to sign up for Prime and Subscribe & Save. It doesn't roll something out of pilot mode (see, e.g., Amazon Fresh) unless it can drive serious business to its primary revenue streams, which have e-commerce written all over them. The last thing Amazon wants to do is take its eye off of the ball and take on Apple with products that simply cannot hold a candle to something like iPad from quality and social phenomenon perspectives.
The Symbolic War
All that said, Amazon has a real chance to overtake Apple in a more symbolic war. I'm not talking about market cap or share price. Rather, Amazon could displace Apple as "America's Company."
Months back, I gave Apple that moniker in several Seeking Alpha articles. I did it because, like the Dallas Cowboys of old, three things are constant with Apple - love, hate and indisputable success. Add to that list - ubiquity.
At present, Amazon is taking a major risk. It's pouring tons of cash back into its business. By and large, investors view this bullishly. They trust Amazon to produce a meaningful return on investment like it generally has in the past. If Amazon can succeed at this plan, and I think it will, it catapults itself to the next level within the realm of American business.
Amazon is already as omnipresent as Apple. Like the red envelopes of the once-great Netflix (NFLX), Amazon's boxes are part of most community's landscapes. If the postal service pukes, it's all good, Amazon will cut itself a sweet deal with FedEx (FDX) or UPS (UPS). Amazon is the dominant force in retail. It does not need to hire away Apple executives to steer the ship. When you think about buying something or shopping for the holidays, you think of Amazon. When you're in a store, Amazon provides you with impulse control - "I should check and see if it's cheaper" or "how the reviews are at Amazon."
Like most symbolic wars this one is mired in subjectivity. Even if Apple hits the product lull that some predict, ardent Apple fans will never give in. I don't think Apple will swoon. But, if it does, Amazon will take its place as "America's Company." There's really no other company that deserves the tag. Even if Apple continues to hum, I think it's perfectly feasible that these two warriors will stand side by side as the two best companies America has to offer throughout this decade and likley beyond.
Additional disclosure: I am short NFLX via a long position in NFLX June 2012 $40 put options.