Feb. 18–Consider this tale of two companies: One is Apple, which posted record revenue of $54.5 billion last quarter and a record net profit of $13.1 billion. The other is Amazon, which reported its net income dropped 45 percent to $97 million in the last quarter. It’s now projecting the loss of up to $285 million for the first quarter of this year.
Yet Apple’s stock is tanking and Amazon is riding a wave. Apple’s stock was down nearly 40 percent from a September high of $705 to a low of $439 on Jan. 25. Amazon’s stock continues to climb to new heights, up 42 percent year-over-year.
The message from Wall Street is clear: Apple CEO Tim Cook’s company already has seen its best days. Jeff Bezos is the new Steve Jobs. Investors want Amazon’s founder and CEO in their foxhole.
These recent developments should strike fear into every retailer who’s in the business of selling goods to consumers. Amazon, not Apple, should be the company everyone is picking apart and learning from. Not just because they’re incredibly innovative, having in many ways pioneered cloud computing. Not because Amazon Prime is a model for customer loyalty. Not even because of Amazon’s push toward one-day and in some cases same-day delivery thanks to their purchase of North Reading’s Kiva Systems.
The real reason retailers should fear Amazon is it’s not treated like most companies. Whereas Apple is a cash cow that gets punished for making billions of dollars, Amazon manages to lose money and still see an astronomical price-to-earnings ratio — 85 compared to Apple’s 10.
Stockholders see Amazon as a company that will change our relationship with the Internet and online shopping.
Some of that already has happened. But Bezos’ vision is even more ambitious: Amazon will automatically deliver what you need so you don’t even have to think about shopping. For instance, Amazon delivers baby diapers and wipes to our house every few weeks. (There’s no good reason to go to the store to get diapers.) A million other products pose the same opportunities for Amazon: paper towels, cleaning supplies, canned goods, dairy.
If it plays out as Bezos would like, Amazon will leverage its massive economies of scale and its lack of retail space to shut down any target it sets its sights on.
Amazon devotees are banking on Bezos and the belief that the dot-com bubble survivor’s best days are still ahead of it.
(c)2013 the Boston Herald