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  • The Web Services Problem [View article]
    Completely different. Not sure why it matters what Wall St thinks; what matters is what the capex is spent on. Microsoft is simply trading customers whose maintenace is free, to customers who's maintenance is expensive. Bad for them, but it's a transfer. Whereas companies big and small are looking to rent dumb space. Microsoft "Azure" doesn't get any bigger bc they are selling their product to themselves, in fact, it's weaking BOTH entity's cash flows.

    I'm not sure why you're acting like you're dismissing what I'm saying, since you in effect agree with it already. just say, "yes, the entire premise of my article is based on a bad comparison". Then you can claim whatever you like.

    I still stay you wrote a pretty decent short case against MSFT. I'd take advantage of that, instead of arguing something that's wrong and you know it.
    Jul 10 12:26 PM | 1 Like Like |Link to Comment
  • The Web Services Problem [View article]
    Absolutely INCORRECT. CRM is traditionally an application, which CRM them moved to the cloud. It's a company born from PeopleSoft and Oracle. Salesforce's revenues are the same as Office 365, it's a business not related to selling a cloud commodity. Salesforce might SAY their product is a commodity, but this is absolutely untrue. The switching costs are significant.

    If you're using Office 365 revenues, you've clearly exposed your hand in this article, and now I completely understand that you wrote it for effect not reality.

    AWS is a commodity product with an element of service and switching costs, but mostly it's a commodity. PaaS would be closer to the CRM business, but still not the same level of customization. AWS is mainly IaaS. AWS's customers are going from buying their own machines, to renting them from a bigger buyer.

    Microsoft, to the extent they are expanding capex thanks to Office 365 growth, is as far away from AWS concerns as one could possibly be. You'd have done MUCH better to write an article about shorting MSFT, bc the costs of their "Office" cash cow have now climbed significantly vs the legacy product (which was stored on all those CUSTOMER'S computers which were ALSO a big revenue source for Microsoft).
    Ha, by revealing your mistake, we've uncovered that you wrote a much more interesting article than I thought, you just picked the wrong company to short.

    Amazon's AWS capex will be entirely UNaffected by Microsoft Azure's capex spending. There's my theory, and it's true, but I'm not going to write an article about it bc I have no incentive.

    I've read the series of articles, they too are frought with error. Altho, it's ironic, I think AMZN the stock is headed for mid double digits and there's a chance it goes away entirely in a bloody battle with a better competitor.
    Jul 9 12:00 PM | 3 Likes Like |Link to Comment
  • The Web Services Problem [View article]
    Paulo, it's a nice theory... so far; but, you've really not done enough research.

    #1 Cloud Revenue: "it depends on what you count".
    How much of what MSFT counts is actually another product, such as Office, Outlook, or Microsoft-OS server rentals for customers stuck on their OS? None of those should count, as they are just Microsoft's traditional application revenues ported to "cloud". 100% of Amazon's cloud revenues are legit, bc they didn't have any legacy application products to port to cloud. Google is a more accurate comp for AWS, and that's probably what you should use; especially, since they are the leader in price reductions vs MSFT.

    #2 Apples to Oranges comparisons:
    MICROSOFT (and Google too) likely has to spend in bursts, in order to justify the lower pricing. Thus for a short while, they can buy in bulk and claim that they can make up the cost in X number of years. But this assumes constant pricing, and pricing has never once shown to be constant in this business. It is FAR easier to be the leader here, as AMZN can spend their capex incrementally as demand picks up. Or, as a leader not afraid of future demand, they can take advantage of component pricing when opportunities arise. Whereas MSFT nor Google can count on future demand, just as their customers can't REALLY count on Google staying in the business. Google has shown a great ability to abandon projects, not by selling them, but shutting them down. Orkut, several social networking attempts actually, Reader, and I wouldn't be surprised if they unload (or already did) Blogger. But let's not focus on Google's mishaps, let's instead focus on the fact that Amazon doesn't have to buy in massive geographic expansion clumps like Microsoft does. The leader is already there, and adding incrementally, based on demand. Whereas the followers need to justify lowering of prices (bc how else can they compete if not on pricing, AWS is clearly the best service so far) by making large capital outlays based on the newest low component prices, and backdoor into cheaper pricing.

    #3 One Year does not a full analysis make:
    Again, you're arguing that AMZN could trade to $100 based on FCF going to zero for a single year. Has this worked in the past? AMZN has had EPS go to zero twice, and yet Wall St gives them the benefit of the doubt due to long-term focus, and takes the stock price higher based on far-future earnings potential. The same here. AWS will get credit so long as they emerge on top. So why are you making a futile argument, that Wall St will all of a sudden make FCF important in AMZN's stock price? Bezos was able to borrow money in the early days to keep his money-losing dream alive, and that was when they were REALLY losing money. Why is that going to change, isn't AMZN and Bezos doing the same thing they've always done? The only times AMZN stock was penalized became massive buying opportunities. FCF going down for one year is not a disaster. But you haven't even supplied enough data anyway.

    #4 Amazon AWS is not Microsoft.
    You make an assumption, or at least try to project, that AWS will need to duplicate mSFT's spending. YET, you do not provide the data required to even make this a decent supposition. By what % did MSFT increase it's capacity with the latest capex? How does that relate to how much AWS needs to spend to grow its capacity? You simply assume that if MSFT had to spend in the last 12 months a certain amt, then AWS will have to spend that same amount.
    As many good retorters have already reminded you, AWS is already in the lead, and doesn't need to play catch-up to a business they already dominate. Thus, they won't have to "spend like MSFT" to maintain the business. Sure, there will be capex, but you've offered no evidence they have to do it in one year.
    Furthermore, one year doesn't matter in this particular business. Would you have argued that the Sands Hotel was doomed bc the casino company had to put forth all that capex in year one? Lastly, as AMZN had proved many times, it's not your upfront FCF that matters, its what you get to reap in the end if you win the ultimate game. Sure, nothing's been proved in ANY of AMZN's business yet; HOWEVER, AMZN HAS made some positive FCF after all these years of massive upfront capex spend, so there's something to be said for looking long term.
    and listen to Google, they essentially argue that upfront spends are part of a big company's job in society, to take the big capital risks that others cannot. You can't start a space company in your garage, or at least, get it moving quickly.
    AMZN knows this (as Bezos is involved in space as well)

    The best evidence in your article is the MSFT map. It shows a doubling of centers.
    But this leaves the question un-answered, does AWS need to double its centers?
    What is the state of AWS geographic expansion? I can't imagine AWS isn't already spread out, given that's a basic requirement for being in this business (duplication, spread out duplication of data, that is).
    So without providing the same map for AWS, you're map actually provides evidence that MSFT's capex spend is likely "catch-up".

    You claim Amazon's fire phone is a dud, using top 100 electronics scores. Fire Phone isn't for sale, it comes out July 25th. It's on ONE carrier, a carrier that plans to carry it in STORES, in a market where most people buy their phones in cellular-branded stores, not Wal-mart and Amazon. To theorize the phone is going to fail this early, is marketing not research.
    Also, same theme, you suppose that AMZN mis-priced their phone high. This should sound familiar: "it depends on what you count". specifically, if you think the "extras" amazon includes with the phone are of no value, such as: a year's subscription to Prime ($99 value), the live support, the 3D gaming effect (which other phones do NOT have) via 3 extra cameras, the book borrowing service, etc.... , then I guess yours COULD be considered a stronger theory. But unlike say iFixit who documents the costs of components, you haven't done this. So you don't even know that in just phone-component terms if Fire phone is actually a good value or not.

    #7 Good-sounding headlines & conclusions-- but lacking evidence to support theories, and research is only half-baked. I'm actually interested in your theory, albeit at MUCH smaller relevance/merit since Wall St won't care about a single year's capex at Amazon, but you've got a lot of work to do to make it a sounder argument. I suggest a re-write or re-traction when you've actually gathered enough evidence to make/break the strong theory you've layed out. As it stands, you've not convinced me of anything with this article, no matter how small a value it is.

    I like your theories, but you are one-sided and without the proper support or research to really make a successful claim. I think by continuing to not acknowledge the flaws in your theories, you set yourself up for less people taking you seriously.

    disclaimer: I'm short a little bit of AMZN prior to reading your article. But my thesis is a bit different than yours. I appreciate your attempts, but they are of little value other than thought provokation.
    Jul 9 11:08 AM | 5 Likes Like |Link to Comment
  • A Real Dividend Growth Machine: Q2 2014 Review [View article]
    might wanna take those dividends in cash. this portfolio is going to be absolutely destroyed in a few years. like, worst performance of any sector. If I was you, I'd go to all cash today.
    Jul 8 01:23 PM | Likes Like |Link to Comment
  • Emerson Radio Corp. Update [View article]
    it's not a good company, in an even worse timeframe; it's a mistake to own this. The market has this priced richly. It's ok to be short term, but not if the long term isn't there.
    Jun 11 10:29 AM | Likes Like |Link to Comment
  • E-Cigs Are A Different Industry From Traditional Tobacco [View article]
    cigarettes are a last-minute buy from the 24/7 store. similar effect with vaporizers, so the low-end will do quite well. This is like saying short Budweiser bc people are drinking craft beers more often. It's also very cyclical, and a downturn in the market will send people rushing for the cheapeast way to vape, which will eliminate high-end stores for vaporizers as flashy and extravagent and not cool. Big companies, whether traditional big 5 or not, will then take advantage by mass-marketing cool themes around cheap "smokes" and a brand or three will emerge as tops. This will take some years, but the best way to play the theme would be to invest in private companies that make the vaporizers, and then you'll need to pick the winner from the thousands out there. not easy to do. i don't see any great way for equity investor to make money in this theme, unless you have access to private start-up market like Sean Fanning (NJOY)
    Jun 9 05:47 PM | Likes Like |Link to Comment
  • Here's What's Smartphone Will Do [View article]
    AMZN stock doesn't trade on eps/earnings, it trades on revenue growth, ONLY. So if enough people buy this phone, regardless of whether a gimmick or not, AMZN will get revenue growth and the stock will go up. Profits are for other companies.

    That's where your analysis goes wrong. 1.9% of smartphone market is gonna be about 20mm phones, times say $200 = $2bn. Plus this phone will make AMZN's job of selling digital goods (books, movies, songs, games) easier thanks to broadening the devices around it's dying model of selling goods requiring no inventory space.

    also, disclose your position in the stock. why write with zero interest involved? AMZN stock price doesn't care what Blackberry's valuation is, that's a bad reason to get short a stock historically (not just with AMZN but remember back when Priceline was worth more than all the airlines combined? sounds like it makes sense, but it matters not to stock market).
    Jun 9 05:10 PM | 1 Like Like |Link to Comment
  • Liquidmetal amends sub-license deal with Visser Precision [View news story]
    These are my guesses:

    1. Visser Precision nor its customers will have to pay anything to LQMT for any liquidmetal products Visser makes and sells. This is what is meant by "retain a license to the full portfolio". From June 2012 agreement: "agreed to sublicense to Visser, on a fully-paid up, royalty-free, irrevocable, perpetual, worldwide basis, all rights held by the Company in the LMT Technology". In other words, Visser didn't just hand over a few million dollars only to get no rights to IP in the end.
    2. Apple agreement dates back to 2010, so any I.P. after that, developed by Apple R&D and placed into Crucible LLC, is not licensed by Visser. Most of this IP relates to manufacturing, not the metal itself. So long as Visser doesn't use Apple's(Crucible) patented mfg methods, Visser can turn liquidmetal into things and sell those things with no money going to Liquidmetal.
    3. Visser's right to make liquid metal products will now be NON-exclusive. This simply means LiquidMetal or any Liquidmetal licensees in the future can use whomever they want to make the products Visser previously had an exclusive license to make (not electronics per Apple agreement). This would be the good news for Liquidmetal.

    This is my best understanding, and could be wrong, but it's from interpreting the legalese in the documents.
    May 22 01:20 PM | Likes Like |Link to Comment
  • Tesla's April Sales Begin Flowing In [View article]
    What is the anecdotal evidence? seems important to state it here.
    May 13 02:17 PM | Likes Like |Link to Comment
  • Tesla's April Sales Begin Flowing In [View article]
    They can fill it every quarter, in the first month, or towards the end of the qtr after meeting sales goals.

    Paulo, I think you're very thoughtful, but there's two wierd things about your Tesla commentary:
    1. you don't have a stock position? why? Why aren't you short? If not to short the stock, what's your motive for the continued observations?
    2. I sense some lawyerish defense of your thesis, not once have you ever acknowledged that anyone else might have a valid point. This came to light during your refusal to acknowledge you overstated your case concerning the Yuan/China reservations for signature (vs. normal) Model S. In that respect, you were just as illusive as you claim Tesla mgt to be.

    I'm not even saying you're wrong yet, but just saying you may not be as objective as you or SA readers might think.
    May 13 02:14 PM | 4 Likes Like |Link to Comment
  • Tesla's April Sales Begin Flowing In [View article]
    Also forgetting that should Tesla meet its declared sales goals for the quarter, they could begin putting cars on ships LATE in the quarter to begin sales process for following qtr. Perhaps you could call this financial management if you like but it doesn't equal peak US sales either way, and I never heard of a public company not using some strategy concerning stock price. Oh wait, I forgot there's Google mgt-- the exception to the rule.
    May 13 02:09 PM | Likes Like |Link to Comment
  • Tesla's April Sales Begin Flowing In [View article]
    Might be the most illuminating comment since Mr Santos began writing his thesis in peak tesla. Makes perfect sense, you ship overseas the first month in order to book the sales in the last month. This would also explain "peak US tesla" bc at the end of the qtr they are shipping to US exclusively and can't ever meet the demand due to supply constraint.

    Santos, no offense, but your theory is definitely in jeopardy, but you may not realize it until 2015! That's a lot of punishment for shorts to be wrong, if Carl Koo is correct.
    May 13 02:05 PM | 6 Likes Like |Link to Comment
  • Tesla's Customer Deposits, North American Demand And The Will To Believe [View article]
    You're saying Tesla mgt would like to raise another billion or more?

    The logic I don't understand is: they only asked for $1.6bn, then were able to do $2.0bn. So why do you think they actually wanted $3bn? If so, there's evidence that they didn't ask for enough money the first time around. so in fact, they weren't looking for $3bn.
    May 8 03:48 PM | Likes Like |Link to Comment
  • Tesla's Customer Deposits, North American Demand And The Will To Believe [View article]
    good point, but they have already raised money towards giggle-factory etc...
    For what else do you think they need to raise money?
    May 8 03:38 PM | Likes Like |Link to Comment
  • Tesla's Customer Deposits, North American Demand And The Will To Believe [View article]
    "hundreds" to me would be about 400 at the high end, maybe 300 at the low end. "almost a thousand" would be phrasing for as high as a thousand.
    I'd use 400, that sounds reasonable for signature models.

    My question to Paulo is: Why would management increase production if they thought US sales weren't going to grow? This would seem to be the action of a nutjob if indeed US demand was truly as poor as you imply.

    I respect your thesis, I'm just not sure it's right. On the one hand, i think you're right that shipments within the US last peaked in mid 2013, but on the other hand, if that were true, why would mgt keep increasing the car production? (as well as increase the Q2 prediction for how many they sell, to a new record of 7,500?)
    May 8 03:26 PM | Likes Like |Link to Comment