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  • Why '2 Billion Hours' Only Strengthens The Netflix Short Case [View article]
    Here is a link to an article titled: "Netflix inks CDN deal with Level3, confirms Akamai worries"

    http://zd.net/q1Eh1x
    Jan 6, 2012. 09:20 AM | Likes Like |Link to Comment
  • In 2012, Google Must Spin Android Straw Into Gold [View article]
    To make the MMI acquisition work will be challenging, and I would agree that Google's margins will be hurt, initially.

    To make the acquisition a positive NPV deal, Google will probably have to make Motorola much more competitive, which will be difficult without making their other licensees dissatisfied, but that doesn't mean they will not pursue some of the initiatives that I listed in my prior comments.
    Dec 29, 2011. 12:22 PM | 2 Likes Like |Link to Comment
  • In 2012, Google Must Spin Android Straw Into Gold [View article]
    Agreed - the MMI purchase does strengthen Google's intellectual property position, but Oracle's suit is about Java, and Oracle may not be as interested in mobile related MMI patents; consequently, Google's leverage against Oracle may be limited.

    But, by having a robust library of MMI patents, Google can hope to indemnify its OEM handset licensees, making it less costly and cumbersome form them to continue using Android.

    Currently, some Android licensees, i.e. Samsung and HTC, are believed to be paying Microsoft substantial royalties (http://bit.ly/sNiDLI), so Android is hardly "free", but still open-source.

    The MMI patents may also enable Google to seek a broad cross-licensing agreement with Microsoft, in order to minimize royalty payments that some of its hardware OEMs are currently paying.

    Regarding Android fragmentation, Google may want to have some sort of "Android certified" application designation that runs on a reference platform. These certified applications might get preferential positioning in the Android Market and give both software developers an incentive to adhere to the reference design.
    Dec 29, 2011. 11:37 AM | 1 Like Like |Link to Comment
  • Netflix CEO Reed Hastings Is Actually Right [View article]
    Regarding DVD library and distribution rights - first sale doctrine gives anyone the right to buy DVDs from any particular source and rent them; no licenses with the movie industry are required.

    http://bit.ly/seLxMT
    Dec 27, 2011. 11:37 AM | Likes Like |Link to Comment
  • Avoid The Recent Hot IPOs And Buy Amazon Instead [View article]
    You are correct. The Amazon press release stated:

    "Amazon.com today announced that Kindle devices remain the hottest products this holiday season – for the third week in a row, customers are purchasing well over 1 million Kindle devices per week..."
    Dec 21, 2011. 11:00 AM | Likes Like |Link to Comment
  • In spite of all the critical Kindle Fire reviews (I, II), Amazon (AMZN +1%) is announcing it's been selling well over 1M Kindles/week over the last 3 weeks. Kindle Fire sales are said to have increased each week. The news lends credence to a recent Goldman forecast of 6M Fire shipments by year's end, as well as to reports of the Fire having an impact on iPad (AAPL) sales. Of course, since Amazon treats the Fire as a loss leader, stronger-than-expected sales could actually hurt its Q4 profits.  [View news story]
    This issue is that the "content" is relatively low margin, since royalties have to be paid to content owners; consequently, Amazon is selling a device with thin margins, maybe even at a loss, in order to sell low margin content/merchandise.

    In the razor/razor blade model, Gillette or Schick own the razor blades and probably enjoy significant margins on the blades. Amazon does not own the vast majority of the content it sells. Amazon appears to be pursuing the exact opposite strategy that Apple employs, since Apple chooses to accept relatively low margins to operate its on-line content stores, in order to sell high margin devices.

    Also, in order to add economic value, any content/merchandise purchased via a Kindle Tablet has to exceed what would have been purchased by the owner of the Tablet, if they had never bought the Kindle Tablet.
    Dec 19, 2011. 10:21 AM | Likes Like |Link to Comment
  • Amazon: Kindle Sales Continue To Surpass 1 Million Per Week [View article]
    The question is how many new Amazon customers will buy the Kindle Tablet, since those sales and any subscriptions (Prime) would be incremental revenue. But, if mostly existing Amazon customers are buying the Kindle Tablet, only those sales above what the customer would have bought without a Kindle Tablet are true value-ad.
    Dec 15, 2011. 03:10 PM | Likes Like |Link to Comment
  • In spite of all the critical Kindle Fire reviews (I, II), Amazon (AMZN +1%) is announcing it's been selling well over 1M Kindles/week over the last 3 weeks. Kindle Fire sales are said to have increased each week. The news lends credence to a recent Goldman forecast of 6M Fire shipments by year's end, as well as to reports of the Fire having an impact on iPad (AAPL) sales. Of course, since Amazon treats the Fire as a loss leader, stronger-than-expected sales could actually hurt its Q4 profits.  [View news story]
    The release did not state that over 1M Kindle Fires/week were old, it stated: "customers are purchasing well over 1 million Kindle devices per week.."

    So, the 1 million number includes ALL Kindle devices, not just the Kindle Fire tablet.
    Dec 15, 2011. 12:45 PM | 1 Like Like |Link to Comment
  • As Bad News Abounds, Amazon Approaches Buy Territory [View article]
    I don't have that answer.

    But regarding digital content margins, the vast majority of digital media sold by Amazon requires royalty payments, which diminishes margins. It appears that, with respect to the Kindle tablet, Amazon is pursuing the opposite strategy pursued by Apple. Amazon has chosen to sell the hardware at minimal margins, if not at a loss, in order to sell relatively low margin digital content. Apple does the exact opposite; they sell high margin hardware (yes, some subsidized by wireless carriers) and tolerate minimal profit from their content stores - iTunes and the App store - in order to make their devices more attractive (see comments by Gene Munster: http://bit.ly/rWcZBR).
    Dec 14, 2011. 12:46 PM | Likes Like |Link to Comment
  • As Bad News Abounds, Amazon Approaches Buy Territory [View article]
    Salesforce.com has ttm revenues of approx. $2.1B which probably exceeds AWS ttm revenues, since in Amazon's latest quarterly results, "other" revenues - which includes AWS - comprised only 3.7% of total consolidated quarterly revenues.

    If you apply the 3.7% share of total revenues, and this assumes that AWS accounts for 100% of "other" revenues, to Amazon's ttm revenues of $43.6B, it results in approx. $1.6B in revenue for AWS on a ttm basis.
    Dec 14, 2011. 11:27 AM | Likes Like |Link to Comment
  • As Bad News Abounds, Amazon Approaches Buy Territory [View article]
    As you know, the vast majority of Amazon's sales come from retail - re-selling stuff; consequently, Amazon's sales may rise, but their profits, for the most part, will not benefit from Moore's Law.

    Moore's law primarily impacts the cost/transistor for integrated circuits as line widths shrink. So, Amazon may enjoy lower costs on electronic components for its OEM products, like the Kindle, but the impact of Moore's law is minimal with respect to the bulk of their retail business. Also, they may benefit from Moore's law like efficiencies with respect to their Web Services business (computing power and storage). AWS is growing quickly but still represents a very small part of Amazon's total revenues.
    Dec 14, 2011. 09:21 AM | Likes Like |Link to Comment
  • Tilson's T2 Fund Spokesperson On Netflix [View article]
    Yes, the P/E on a trailing twelve months basis is 17, but finviz.com lists the forward P/E at 215. This assumes Netflix is profitable next year, which is no guarantee, especially considering Reed Hastings' recent comments about weak U.S. profits at the UBS Media conference, last week.
    Dec 13, 2011. 11:27 AM | 2 Likes Like |Link to Comment
  • Netflix: The Method Behind Reed Hastings' Madness [View article]
    Looks like takeover rumors are driving the price up:

    10:54 AM EST, 12/12/2011 (MidnightTrader) -- Shares of Netflix (NFLX:$76.523,0$5.633,... were up 6.4% at $75.40 but have since lost a bit of those gains amid market chatter that Amazon (AMZN:$189.30,00$-3.73... is making a play for the company, according to SeekingAlpha.
    Dec 12, 2011. 11:42 AM | Likes Like |Link to Comment
  • Kindle Fire Returns Could Hit Amazon's Earnings [View article]
    Paulo, in addition to your previous comments on the "razor blade" model, one also has to note that Gillette owns the razors; consequently, they enjoy relatively high margins on razor sales. Via the Kindle tablet, Amazon is hoping to sell digital content and other products which it typically has to pay royalties on; consequently, the margins are relatively thin, making it more challenging to obtain economic profits. Also, any content sold via the Kindle tablet has to be incremental to what the owner of the device would have bought, if they had not owned a Kindle.

    Thanks for your insights.
    Dec 8, 2011. 09:02 AM | Likes Like |Link to Comment
  • The Kindle Fire Is On Fire: Amazon Expected To Ship 3.9 Million This Quarter [View article]
    Gillette owns the razors; consequently, they probably enjoy relatively high margins. Amazon's gross margins on digital media sales will be relatively low, since they will have to pay royalties on content that they don't own. Also, any product sales via the Fire have be be incremental to what the owner would have bought, without the Kindle Fire. In order to be profitable, Kindle Fire owners will probably have to purchase a significant amount of the "other" Amazon products (not just digital media) you mentioned in your response.
    Dec 5, 2011. 02:49 PM | Likes Like |Link to Comment
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