Amazon’s Cardboard box against yellow with smile logo on it
The main story for Amazon was a toss up between the mega Bezos-Cook-Zuckerberg-Pichai-zilla 6-hour grandstanding spectacle that is unlikely to result in anything meaningful in the short-term. The main findings? Amazon uses aggregate seller data for private label products (surprise!). Echo devices may be sold at a loss when discounted (!) and Bezos promises that Amazon doesn’t snatch anything from AWS data on its competitors or products but can’t guarantee Amazon’s policy against using seller data has never been violated. Ouch.
Before testifying, Bezos read a statement out which paints an interesting picture of why his is the way he is and why Amazon is the way it is.
“Amazon’s success was anything but preordained. Investing in Amazon early on was a very risky proposition. From our founding through the end of 2001, our business had cumulative losses of nearly $3 billion, and we did not have a profitable quarter until the fourth quarter of that year. Smart analysts predicted Barnes & Noble would steamroll us, and branded us “Amazon.toast.” In 1999, after we’d been in business for nearly five years, Barron’s headlined a story about our impending demise “Amazon.bomb.” My annual shareholder letter for 2000 started with a one-word sentence: “Ouch.” At the pinnacle of the internet bubble our stock price peaked at $116, and then after the bubble burst our stock went down to $6. Experts and pundits thought we were going out of business. It took a lot of smart people with a willingness to take a risk with me, and a willingness to stick to our convictions, for Amazon to survive and ultimately to succeed.”
Watch the whole six-hours from C-SPAN:
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The end of the week saw bumper earnings from Amazon and marked “another highly unusual quarter”. The company can’t downplay or spend money fast enough to not look like its printing money. Foresight Factory pre and during pandemic consumer data shows how this ‘unusual quarter’ might become a long-term trend which just might see Amazon become the first £2 trillion company (especially if the moves into hospitals and healthcare sectors increases).
Foresight Factory 2020 data regarding online shopping.
Operating cash flow increased 42% to $51.2 billion (vs $36.0 billion YoY). Net sales are up 40% to $88.9 billion in the second quarter ($63.4 billion last year). Operating income increased to $5.8 billion ($3.1 billion last year). Net income increased to $5.2 billion in Q2 2020. Last year, Amazon saw $2.6 billion, in Q2. No shareholders are going to be mad at that but perhaps cautious about where the next growth is coming from. Keep an eye on healthcare – pretty much the only option for such a large chunk of change to go into Amazon’s pockets.
“This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe,” said Jeff Bezos, Amazon founder and CEO. “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand—purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions. And third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS.”
Finally, the other interesting nugget for the week came from Amazon receiving approval from the FCC for the 3,236 internet satellites to go into space. Amazon’s ‘Project Kuiper’, is a satellite-based broadband internet service that will connect households across America with high-speed broadband. Amazon also noted the company will be spending over $10 billion in Kuiper (testing, building etc). TechCrunch has more on the story.
“Amazon lags behind SpaceX in terms of deployment, since the latter company is actually launching satellites for its Starlink network, and looks ready to enter a beta testing program for the service this summer. The Jeff Bezos -led e-commerce giant has opened a brand new R&D facility in Redmond, Washington dedicated entirely to Kuiper development, however, and partner Blue Origin, Bezos’ space launch company, has been securing significant industry partnerships and could be ready to provide launch services for Kuiper satellites relatively soon.”
Think you know enough about Amazon? Now you do.
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