Amazon's Fire Dwindles


In its quarterly earnings announcement yesterday, Seattle based Amazon.com, the largest US eCommerce company, admitted that it has missed bith revenue and profit estimates for Q3, 2014.

These disappointing third-quarter results see the online retailer’s shares at 9 percent lower than the 7 to 18 percent revenue growth that was originally forecasted. This loss has taken more than $15 billion off of Amazon’s market value (now at $144.7 billion) and seen their stock plummet 13 percent since the poor Q2 results announced in July. Amazon is reporting losses around $437 million resulting from failed product launches and various acquisitions and expansions that take the ecommerce company further and further away from their original charter and core competency.



Amazon continues to invest heavily in hardware devices, expanding it to include a phone and dropping the word "Kindle" from their Tablet line of products, simplifying it to just Fire. However,  the hyped Amazon Fire Phone has proven to be a costly burden for the company. The AT&T exclusive device had launched with a $199 with contract price tag and dropped to just $1 after two months. Amazon is taking a $170 million write-down on their unsold smartphone and supplier commitment costs, and admitting to a $83 million stock of unsold inventory since the phone was released to the market in July

Also, Kindle tablets see a sharp decline in their percentage of market share as Windows Tablets start getting adoption, in addition to the immensely popular iPad and its major competitor,

Also, Amazon's streaming media player dubbed "Fire TV", a late entrant to the internet TV set up boxes hasn't gained either mindshare or market share. 

Amazon has also been bleeding money into production of original programs such as their dark comedy, “Transparent”, a strange and tangential expansion into the costly world of movie and TV program production and in competition with Hollywood studios. 

Similarly, Amazon has been investing heavily into launching “Amazon Fresh" delivery service targeted as delivery of groceries and other daily consumables. I also spent $970 million on the acquisition of the video gaming platform, Twitch.

 While Amazon has definitely established itself as a well respected brand name in delivery of both printed and electronic books, trying to compete with hardware companies such as Apple or Samsung, stream media specialists like Netflix or movie studios seems to be a very risky proposition  - these other companies have decades of lead over Amazon and have thousands of very talented and innovative employees.  

What gets worse is that in the call, Amazon executives failed to share any plans that show a turnaround strategy to save the company. Investors expected to see Amazon start to deliver sustainable profits, instead, it greeted them with wider than expected losses. It is clear from the 8.24% decline in stock's price today that the investors are running out of patience. In place of focusing on it's core competency, Amazon has tried to take on too much too soon, thus losing focus. Analysts are already projecting a $570 million loss for Q4 which will be the largest loss ever in company's existence. 

Comments

  1. Amazon's talent is selling books. I applaud their experimentation in other means of revenue because you never know what will work. I see their future in some sort of a partnership arrangement with agents with good client lists. As a published author, I don't see traditional publishers doing much for their clients except distribution and Amazon has that nailed in spades.

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