Amazon's Margin Myth: Sleight Of Hand
Paulo Santos • 108 Comments
Paulo Santos • 108 Comments
Amazon's Margin Myth: Sleight Of Hand
Paulo Santos • 108 Comments
Paulo Santos • 108 Comments
Oct. 22, 2015, 5:37 PM
Oct. 22, 2015, 4:04 PM
- Amazon (NASDAQ:AMZN): Q3 EPS of $0.17 beats by $0.30.
- Revenue of $25.36B (+23% Y/Y) beats by $450M.
- Expects Q4 revenue of $33.5B-$36.75B (+14%-25% Y/Y) vs. a $35.2B consensus. Expects Q4 op. income of $80M to $1.28B.
- Shares +8% after hours.
Oct. 21, 2015, 7:26 PM
- HP's (NYSE:HPQ) Helion public cloud infrastructure (IaaS) services will be shuttered on Jan. 31, 2016, HP Cloud SVP Bill Hilf discloses in a blog post. Going forward, HP "will move to a strategic, multiple partner-based model for public cloud capabilities," as part of its effort to enable hybrid (integrated public/private) cloud deployments.
- Hilf reiterates HP's commitment to its private and managed cloud offerings, which leverage software based on the open-source OpenStack cloud infrastructure platform (also backed by Rackspace, IBM, Red Hat, and others). Last year, HP bought Eucalyptus, a provider of open-source IaaS software that competes with OpenStack and integrates well with Amazon Web Services (AWS).
- HP's decision comes with AWS on a $7B+/year run rate, and with IaaS rivals such as Microsoft, IBM, and Google also seeing strong growth. Amazon (NASDAQ:AMZN) recently rolled out new services to make it easier for enterprises to migrate workloads to AWS. Meanwhile, VMware just suggested industry adoption of public cloud services is weighing on its results.
- Earlier: HP sells TippingPoint security hardware unit for $300M
- Six months ago: HP denies public cloud exit, but wants to avoid competing with giants
Oct. 21, 2015, 5:35 PM
- ACTG, ALGN, ALTR, AMZN, ATHN, BAS, BCR, BJRI, BYD, CHE, COF, CYN, CYT, DV, EGHT, ETFC, FET, FII, FSL, FTNT, GHL, GIMO, GOOG, HBHC, HURN, IG, JNPR, LHO, LOGM, LSTR, MKTO, MSFT, MXIM, N, NTGR, P, PACB, PEB, PFG, QLGC, QLIK, QSII, RMD, SHOR, SIVB, SKX, SMCI, SPNC, SRCL, SWN, SYK, SYNA, T, TRN, UCTT, VRSN, WRE
Oct. 21, 2015, 6:26 AM
- Starbucks (NASDAQ:SBUX) and Fiat Chrysler (NYSE:FCAU) have been ordered to pay tens of millions of euros in tax repayments, under a new ruling that may spell big trouble for other corporations.
- "All companies, big or small, multinational or not, should pay their fair share of tax," EU antitrust chief Margrethe Vestager declared at a news conference today, stating the two companies' European tax deals were illegal.
- Who's next? European regulators are finishing up investigations into McDonald's (NYSE:MCD) and Amazon's (NASDAQ:AMZN) tax affairs in Luxembourg and Apple's (NASDAQ:AAPL) arrangements in Ireland.
- Previously: Starbucks, Fiat in hot water over European tax deals (Oct. 15 2015)
Oct. 20, 2015, 3:19 AM
- Amazon (NASDAQ:AMZN) is creating 100K seasonal jobs across its U.S. network of fulfillment and sortation centers to meet increased customer demand during the holiday season.
- "Following last year's holiday season, tens of thousands of seasonal employees found regular, full-time roles with Amazon," said Mike Roth, Amazon's vice president of North America operations.
- The company, which created 80K seasonal jobs last holiday season, has also hired over 25K full-time employees since August.
Oct. 17, 2015, 3:05 PM
- Wal-Mart (NYSE:WMT) ripped the band-aid off this week to reset expectations for three years worth of earnings in one decisive action.
- Though the Wal-Mart bombshell rocked a large number of retail stocks initially, many recovered during the week or pared their losses. Two notable exceptions were Target (NYSE:TGT) and Best Buy (NYSE:BBY) which ended the week sharply lower due in some part to their similar track of heavy investments in e-commerce.
- While investment firms analysts turned defensive this week on Wal-Mart (SA summary, BI summary), Target (TGT), and Best Buy (BBY) - some retail insiders see a different dynamic playing out. They note that, unlike Amazon (NASDAQ:AMZN), the brick-and-mortar retail giants have decades in building out strategic infrastructure, supplier networks, and delivery systems. At a larger scale, and on a longer time frame, those advantages could lead to higher margins for the trio than Amazon as tech investments pay off.
Oct. 14, 2015, 10:26 AM
- A day after downgrading VMware on fears Amazon Web Services (AWS) will take a toll, JMP's Patrick Walravens has done the same for Oracle (ORCL -1.1%), cutting shares to Underperform and setting a $31 target.
- Walravens notes AWS recently disclosed its database business is on a $1B/year run rate, and has seen 127% Y/Y usage growth. Amazon (NASDAQ:AMZN) is 11 months removed from launching a "commercial-grade" database (known as Aurora) that targeted Oracle, and a week removed from unveiling a database migration service and storage transfer appliance for enterprises looking to move workloads to AWS.
- He adds there's "increasing customer dissatisfaction" with Oracle's pricing and auditing policies (previous), and that some of Oracle's cloud deals stem from major sales incentives and "may not go live."
- Separately, Oracle has been awarded $50M in a copyright infringement lawsuit against Rimini Street, a provider of 3rd-party maintenance/support services for companies using Oracle and SAP's software. Oracle had sought $245.9M; Rimini, which might appeal, argued it should only pay $10M.
- The legality of Rimini Street's services wasn't on trial, and Rimini insists the suit covered "processes no longer in use." Oracle's ongoing battle with Rimini has been closely watched due to the potential of 3rd-party firms to eat into Oracle and SAP's cash-cow maintenance/support businesses. Oracle's license update/product support revenue totaled $4.7B in the August quarter, or 56% of revenue.
Oct. 8, 2015, 7:32 PM
- Day two of Amazon's (NASDAQ:AMZN) AWS re:Invent conference has brought the beta launch of AWS IoT, a service for processing and analyzing data from numerous Web-connected embedded devices (cars, home appliances, industrial equipment, medical devices, etc.).
- AWS exec Jeff Barr: "Although critics sometimes dismiss [IoT] as nothing more than 'put a chip in it,' I believe that the concept builds upon some long-term technology trends ... To me, the most relevant trends are the decreasing cost of mass-produced compute power, the widespread availability of IP connectivity, and the ease with which large amounts of information can be distilled into intelligence using any number of big data tools and techniques."
- Microsoft, IBM, and Salesforce are among the companies to have already announced cloud-based IoT analytics/data-processing services. AWS IoT follows Amazon's March purchase of IoT service provider 2lemetry.
- Also launching today: AWS Mobile Hub, a solution promised to simplify "the process of building, testing, and monitoring mobile applications that make use of one or more AWS services." A console UI gives app developers the ability to pick "higher-level features" combining one or more services, SDKs, and pieces of code. Barr: "What once took a day to properly choose and configure can now be done in 10 minutes or so." A slew of AWS mobile app development services have launched over the last 3 years.
- Meanwhile, Amazon has received good reviews for yesterday's AWS announcements. Many observers note the new offerings, such as the Snowball storage/data-transfer appliance and database-migration services (not to mention a new Accenture business unit focused on AWS migrations), aim to make it as easy as possible for enterprises to ditch traditional IT infrastructures in favor of AWS' public cloud.
- The NYT's Quentin Hardy: "Previously, old-guard enterprise companies dismissed A.W.S. and cloud computing, then grudgingly ceded them a place for start-ups and new applications. But with about three-quarters of information technology spending going to maintaining legacy systems, they could afford to. Wednesday, Amazon went after the rest of their business."
Oct. 8, 2015, 11:57 AM
- ETSY has sold off following the launch of the Handmade at Amazon craft goods marketplace (anticipated for several months). Volume has been moderate - 430K shares vs. a 3-month daily average of 1.12M.
- "Etsy has a decade of experience understanding the needs of artists and sellers and supporting them in ways that no other marketplace can," the company states in an official response to the Amazon (NASDAQ:AMZN) launch. "Our platform attracts 21+ million thoughtful consumers seeking to discover unique goods, and build relationships with the people who make and sell them."
- For now, Etsy's selection dwarfs Amazon's - the company had 29M items listed on its site at the end of 2014, whereas Amazon's marketplace (has set strict listing rules) currently has 80K+. Amazon is hoping to gain ground by promoting its marketplace to its 285M+ active customers, by offering craft goods makers access to its fulfillment services (including Prime, for those able to ship quickly), and by courting sellers who have struggled to get noticed on Etsy. “I want to get more than 150 page views," says one Etsy seller giving Amazon a try.
- Notably, Amazon is taking a 12% cut on marketplace sales. Etsy charges only 3.5% plus a $0.20/item listing fee. Not all Amazon e-commerce platforms attempting to unseat entrenched incumbents have been major successes, as Groupon can vouch.
Oct. 8, 2015, 10:30 AM
- ChannelAdvisor (ECOM -5.7%) reports clients selling on eBay (EBAY -6.3%) saw their same-store sales rise 1.1% Y/Y in September. That's down from 3.4% in August, well below U.S. e-commerce growth of ~15% (per comScore), and the slowest rate of growth over the last 12 months.
- Only a 13.3% increase in Motors same-store sales (down from 20% in August) kept eBay's growth positive. Auctions were down 31%, and fixed-price sales 0.7%.
- Amazon (AMZN -1.9%) fared better, with same-store sales rising 19.2%. However, that's down from August's 24.7%, and also a 12-month low. 35.9% of Amazon-related GMV relied on Amazon's fulfillment services (FBA), up from 29.9% a year ago, with sellers using FBA seeing 30.1% same-store growth.
- Google Shopping/Product Listing Ads (indirectly competes with Amazon) were strong, registering 46.1% same-store growth with the help of higher conversion rates. Some of their growth came at the expense of search ads (dominated by Google), which saw a 9.5% same-store decline.
Oct. 8, 2015, 4:13 AM
- Amazon (NASDAQ:AMZN) has launched a marketplace for handcrafted goods, a move that takes direct aim at market leader ETSY.
- "We don't allow any mass manufacturing, we don't allow any factory-made products. All of these products have to be handmade and hand-manufactured," Amazon Marketplace vice-president Peter Faricy told Reuters.
- The new site, called Handmade at Amazon, went live at 3 a.m. ET with a lineup of over 80K items from 5K sellers in 60 countries.
- Take a look at the new website here
- Previously: Amazon plans to launch Etsy rival (May. 22 2015)
Oct. 7, 2015, 2:49 PM
- Accenture (ACN +0.7%) is partnering with Amazon Web Services (AWS), by far the biggest player in the public cloud infrastructure (IaaS) services market, to create the AWS Business Group, an Accenture unit that will offer consulting and IT services to enterprises looking to migrate and/or run workloads on AWS.
- Accenture and Amazon (NASDAQ:AMZN) promise to "invest significant resources over multiple years in the development of new services and technology solutions including application migration and development, cloud-based enterprise applications, and analytics and Big Data solutions," and to "train an additional 1,000 Accenture professionals and certify 500 Accenture professionals on the AWS Cloud in the first year."
- Initially, the main focus areas will be "transformation services" for migrating existing apps and developing new apps on AWS, and enabling AWS-powered big data/analytics services. IoT and security-related services will be explored, among others.
- The announcement comes during Amazon's annual AWS re:Invent conference, and a day after Accenture announced a refresh for its cloud services platform. New features include easier virtual machine migration, better data resource control and bill management, and integration with top cloud IT service management (ITSM) software vendor ServiceNow's products.
Oct. 7, 2015, 1:38 PM
- As expected, AWS chief Andy Jassy's keynote at the annual AWS re:Invent conference (webcast) hasn't been short on product announcements. Perhaps the biggest is QuickSight, a cloud-based business intelligence/analytics service that integrates with AWS cloud storage and database services, and which Amazon (AMZN -0.2%) claims will allow customers to start visualizing data within 60 seconds.
- The WSJ recently reported an analytics solution was on tap. Much like BI/analytics tools from Tableau (NYSE:DATA), QLIK, Microsoft, and Salesforce (among others), Amazon is looking to appeal to non-technical corporate workers, many of whom still use Excel spreadsheets for data analysis and reporting.
- As usual, Amazon is pricing aggressively: It claims QuickSight will cost 1/10 as much as rival products (rivals might beg to differ). Analysts defending the market's existing players have argued Amazon's solution will appeal more to SMBs than enterprises, given enterprises have preferred on-premise BI solutions.
- Also launching: Snowball, a 50TB storage appliance for clients that need to transfer huge amounts of data to AWS. A built-in Kindle acts as an automatic shipping label.
- Other product announcements: 1) A service for migrating databases to AWS, a schema conversion tool for making databases AWS-friendly, and support for the open-source MariaDB database. 2) Kinesis Firehose, a data-transfer solution for the Kinesis real-time data streaming service (launched in 2013). 3) Inspector, a tool for detecting potential security and compliance issues with AWS-run apps.
- Amazon's AWS revenue totaled $1.82B in Q2 (+81% Y/Y), and op. income $391M. For the 12 months ending in June, revenue totaled $6B.
- Last year's AWS re:Invent announcements
- Update: Also announced: IT consulting/outsourcing giant Accenture is forming a new business group to help companies migrate workloads to AWS. Accenture and AWS plan to invest significant resources over multiple years in the development of new services and technology solutions including application migration and development, cloud-based enterprise applications, and analytics and Big Data solutions. The companies are committed to train an additional 1,000 Accenture professionals and certify 500 Accenture professionals on the AWS Cloud in the first year, and support go-to-market activities."
- Update 2: One thing not announced today: AWS price cuts. Jassy insists Amazon simply isn't choosing to focus on price cuts at re:Invent. "Prices will continue to go down. Prices went down several times already this year."
Oct. 6, 2015, 4:04 PM
- Following multiple rumors to the effect, Rackspace (NYSE:RAX) has announced a deal with rival Amazon Web Services (NASDAQ:AMZN) at the AWS re:Invent conference under which Rackspace will "offer tools, expertise, application management, and operational support to customers on the AWS Cloud."
- In addition to a core support service known as Fanatical Support for AWS, Rackspace is launching (in beta) AWS-related services for managed security, compliance support, and the management of Adobe's Experience Manager content management solution. The company has also become an authorized AWS reseller and consulting partner.
- With revenue of $6B for the 12 months ending June 30, AWS remains the 800-lb. gorilla of the public cloud infrastructure (IaaS) market. Rackspace closed down 0.5% today, after rallying strongly yesterday.
Oct. 6, 2015, 3:11 PM
- "Multiple content owners have told me that Amazon (AMZN -1.6%) has been quietly asking them about licensing content for a live streaming service," streaming industry analyst Dan Rayburn reports. He cautions those he has spoken to haven't disclosed how far Amazon has progressed in creating such a service, and that the company may simply be exploring its economics.
- Rayburn notes Amazon's recent purchase of video encoding/processing software and service provider Elemental Technologies (reportedly for ~$500M) would be helpful if it goes ahead with a live streaming launch. This year has seen Dish and Sony respectively launch their Sling TV and PlayStation Vue Web TV services; there have also been several reports Apple is prepping an offering.
- Separately, in a report that helps back up Eric Schmidt's assertion that Amazon (rather than Microsoft, Yahoo, etc.) is Google's (GOOG -0.2%) biggest search rival, e-commerce software firm BloomReach states a survey of 2,000 U.S. shoppers found 44% go directly to Amazon's site/apps when looking looking to buy/research a product online. 34% start with Google or another search engine, and 21% go to another retailer's site.
- Direct visits to Amazon affect Google's search ad revenue, which depends heavily on ad-buying from online retailers (including Amazon). Google has been trying to counter Amazon by integrating its successful Product Listing Ads with search results, and (through a feature called Purchases on Google) by allowing those who click on the ads to complete their orders on Google's site, using payment data already connected to their Google account.
- Amazon's AWS re:Invent conference kicks off today. New product announcements, including possibly an analytics service, are expected during a Wednesday keynote (starts at 11:30AM ET) from AWS chief Andy Jassy.
- Update (10/7): Bloomberg also reports Amazon is working on an online TV service. It adds the company has reached out to network owners such as CBS and NBCUniversal to gauge their interest.
Amazon.com, Inc. provides online retail shopping services. It provides services to four primary customer sets: consumers, sellers, enterprises, and content creators. The company also provides other marketing and promotional services, such as online advertising and co-branded credit card... More
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