Friday, 25 October 2013

Amazon is making lots of money and losing lots of money.

Amazon is making lots of money and losing lots of money.

The darling of Wall Street (what the New York Times calls the company as "the teacher's pet") recent data on Q3, showed more of the same.

Great sales with continued great losses.

Revenue was up a staggering +24%, beyond expectations, to just over 17 billion usd. But it lost, 41 million usd in this quarter. They lost 274 million last year although some of that attributable to poor investment in the deals site, Living Social.

But how do you generate 17 billion of turnover and still lose, 41 million? Beats me.

Investors see it all as ramping up for the future, with the Amazon Share price now 10 times what it was in 2008. In particular, they see Amazon's investment in string after string of Warehouses (100+), as enabling it to become the biggest retailer in the country. Hmmmm.

Amazon is still warning of a further loss in Q4 and investors are still smiling.

I do think Amazon is a great company and I do think The Kindle will bring it places. 

However, I do not like a strategy of owning warehousing (although I understand why) because it's old economy. These services could be supplied by someone elsewhere - they are massively eating into potential profits.

They require significant investment in perishing stock (which books for example, are) as well as high levels of investment in property that can quickly devalue. Maintenance is high and consistently rises. Staff are required 247. It's a little bit mad.

The consistent growth in Amazon is undoubtedly superb and a real indicator that what they're doing is right. However, the losses cannot go on forever like this - it is truly laughable not to be able to generate a profit on these turnovers. Something is endemically wrong with cash management and that's not good long term.

Investors are smiling.
But for how long?

I've seen it so many times before - investors will get tired of this and then things could go South. Amazon needs to make money early in 2014. Must.

Twitter IPO circa November 15th will be priced at 17-20 Dollars a share.

Twitter will price its shares at their upcoming IPO on November 15th (or sooner) at between 17 and 20 Dollars.

It's not greatly significant in itself, but would value the company at around 11 billion usd at these prices and these share prices will increase. 

So Twitter is heading to that 15 billion usd mark.

It's not like the Facebook IPO in money terms, but it will be easily, in hype.

Twitter are selling 70 million shares to raise 1.4 billion usd in this initial offering. Facebook offered 400 million shares at 38 usd raising 16 billion usd.

The fundamental core behind getting involved in buying shares in a company is to whether or not you think it's a good company with a future. Period. If you think it is, then look at the numbers and take a view on the price and fully understand that Wall Street will manipulate you. 

I think what Twitter does is great and hard to replicate, but there's room for improvement. Like the way tweets load at once and the constant security hack issues....but generally, it's a good one and only starting to show good advertising returns (which means there's a lot more to come).

But hey, be careful out there.
Most people lose their shirt.

Thursday, 24 October 2013

Ipad Air. The launch and now the Ad. Pretty good it is too.

Have to say, having blogged on Wednesday about the launch of The IPad Air, I hadn't seen the new TV Commercial and it's actually pretty good.

With a voice-over by Bryan Cranston, the actor of the hour from 'Breaking Bad', it compares it to a pencil. Nice idea in there.

It also reflects the Apple ethos which goes back to the "Crazy ones" commercial where it's not about the product, but what you can do with it. 

Instilling dreamy thoughts of exploring, science, discovery, writing and so on - the benefits - it's exactly as all good advertising should. It's not what it is, but what you can do with it.

"It's an extremely simple tool" says Cranston and an extremely simple piece of advertising. As all the best ones are.

I presume the Agency is TBWA but it has Wieden Kennedy written all over it. Have they started an advertising trend?

Whatever about the Ipad Air, this advertising will sell it. 

Wednesday, 23 October 2013

Apple launch Ipad Air. Much ado about nothing?

So much ado about nothing. Or is it?

Apple's long awaited, over excited, highly pumped PR launch of the new Ipad (the first launch was in 2010), the 'Ipad Air', just didn't seem worth the 'long-awaited' wait.

Okay it's much lighter and slimmer, about 20% less, which MD Tim Cook said took "years" to develop and heralded it as a big "leap forward", a new generation but then there was little else to say. 

It replaces the IPad 4.

It comes with a better HD camera for 'Facetime' and dual microphones but regrettably, the same battery life. Don't know about you but speed has not been an issue with my IPad, nor camera, nor microphones - but battery life has. As the Ipad moves into movies, extended battery life will be key and that hasn't been fixed.

Innovation has to solve a problem, rather than just for the sake of it.

The Ipad Air is much, much faster too (A7 chip) and it comes with free Mac software, although costing £739 stg for the 128 gig, Wifi enabled version, it's not cheap. The entry level 16 gig version, will be about £399 stg when it's available on November 1st. But 16 gigs, is really of little use in my view.

It's an increasingly competitive market too with Samsung and Nokia "phablets", although Apple's is guessed to have a 32% market share having sold 170 million Ipads. 

Nokia of course, have just been bought by Microsoft for over 5 billion usd and launched their new Windows 8 tablet this week too. Microsoft's own 'Surface2' went on sale yesterday but nobody seemed to care. They were watching Apple.

So it's a hot space to be in.

One of the great criticisms after Steve Jobs (I know, yawn) is that Tim Cook's leadership hasn't brought real innovation to Apple since.

If this is a sign of it, I'm inclined to agree.

A lighter, faster, more expensive, Ipad might be good and useful but it's hardly, earth shattering. 

And earth shattering was how Apple used to be.

Tuesday, 22 October 2013

Google powers on. They know how to make money.

Google powers on.

A +23% rise in revenue for its Internet business, in Quarter 3 to 10.8 billion usd, (all revenue was nearly 15 billion usd) boosted the stock to circa 1,000 usd, a new record.

Although their average cost-per-click rate went into further decline, it was well offset by the high jump in volume.

Basically, Google is suffering from lower margin but a rapid increase in volume. The total amount of paid "clicks" is up +26% year on year (yoy).

Yahoo on the other hand, reported a drop in revenue the same week so it's likely that Google's growth is both organic and that it's taking market share from competitors. It's also enhancing its cashflow position as well as better Ad revenues up +17% yoy.

Motorola, which they own, showed a growing loss in Q3 of 248m usd and it's a continuing bad loss when compared to previous years. A 24% increase of a loss yoy. So still problems there.

But these are strong, effective, healthy results at Google. It also shows the company has adapted well across all devices, notably mobile (40% of YouTube traffic is now mobile), and particularly for their 'Adwords' product.

To be fair, Google is the best Search product in the market and continues to retain customer loyalty and has become intuitive. It is also well-run with a good employee profile and practices.

Their brand strength and cash warchest, is continuing to make things difficult for their competitors. 

In time, they might consider to acquire them and be done with it.