Our colleague Barney Jopson has an FT e-book out today that expands on his earlier series of articles about Amazon. Click through to buy it:
From the FT’s Barney Jopson and Vivianne Rodrigues:
Amazon was set to issue a bond for the first time in more than a decade on Monday, taking advantage of rock-bottom borrowing costs as it continues an investment drive that is withering its profits.
Amazon;s Prime service, a linchpin of its effort to keep customers loyal and fuel long-term profit, has attracted fewer than half as many members as analysts estimate, says Bloomberg, citing three people familiar with the matter. As of October, 3m to 5m people subscribed to Prime, a program begun in 2005 that provides two-day shipping for $79 a year, said the people, who asked not to be named because the figures are private. Amazon is working to reach 7m to 10m in the next 12 to 18 months, the people said. Analysts have pegged the current number at 10m or more, with expectations for it to climb higher this year. Read more
Amazon reported revenues that fell short of market expectations in the Christmas quarter, the FT reports, sending its shares down nearly 9 per cent in after-hours trading. The US retailer’s sales were $800m below consensus Wall Street forecasts and grew at a slower rate than in the previous three quarters, although the $17.4bn figure was still up 35 per cent from a year ago. Operating income at the online retailer fell 45 per cent to $260m from a year ago. The sales miss raised questions over the case made by Amazon’s many stock market fans, who downplayed the significance of shrinking profit margins earlier last year by endorsing the company’s argument that it was making investments that were yielding ever-faster sales growth. Read more
Research In Motion turned down takeover overtures from Amazon.com and other potential buyers, preferring to concentrate on fixing its problems on its own first, says Reuters, citing people with knowledge of the situation. Amazon hired an investment bank this summer to review a potential merger with RIM, but it did not make a formal offer, said one of the sources. It is not clear whether informal discussions between Amazon and RIM ever led to specific price talk, or who else had approached RIM about a takeover. The board wants RIM co-chief executives Mike Lazaridis and Jim Balsillie to focus on trying to turn around the business through the launch of new phones, better use of assets such as BlackBerry Messaging and restructuring. The WSJ meanwhile says Microsoft and Nokia “flirted with the idea” of making a joint bid for RIM in recent months, citing people familiar with the matter, but said the status of the talks remains unclear. RIM shares rose 11 per cent in late trading after the two reports, says Bloomberg. Read more
Amazon shares plunged 12 per cent in after-hours trading on Tuesday after the online retailer forecast a possible operating loss in the fourth quarter as it spends heavily on launching its tablet computer rival to Apple’s iPad, the FT reports. The US online retailer issued a wide forecast range for the biggest shopping quarter of the year, stretching from a potential operating profit of $250m to an operating loss of $200m. In recent quarters, Amazon has a record of sacrificing profitability in order to invest in initiatives that will generate new sales, but investors’ willingness to accept this will be tested by the possibility of a loss. Amazon’s new tablet, the Kindle Fire, has a price point of $199 in order to compete with the iPad. At this price, Amazon loses $10 per device, reports Bloomberg. Read more
Amazon shares plunged 12 per cent in after-hours trading after the online retailer forecast a possible operating loss in the fourth quarter as it spends heavily on launching its tablet computer rival to Apple’s iPad, the FT reports. The US online retailer issued a wide forecast range for the biggest shopping quarter of the year, stretching from a potential operating profit of $250m to an operating loss of $200m. In recent quarters, Amazon has a record of sacrificing profitability in order to invest in initiatives that will generate new sales, but investors’ willingness to accept this will be tested by the possibility of a loss.Jeff Bezos, Amazon’s founder and largest shareholder, saw his stake lose as much as $4.67bn in value on Tuesday, says Bloomberg, in both regular and extended trading, based on his holdings at as August 18.
Analysts have greeted Amazon’s launch of its Fire tablet computer as the first true challenge to Apple’s iPad, the FT reports. Priced at 50 per cent below an iPad and featuring a smaller screen, the Fire tablet is a bet on a stripped-down ‘cloud’-based approach versus the iPad’s impressive array of hardware, Bloomberg says. Both companies are therefore attacking each other from a position of strength, John Gruber of Daring Fireball argues. Whereas Apple is earning a gross margin of 30 per cent or more on each iPad, Amazon is taking a $50 loss per Amazon Fire sale, Fortune writes citing Piper Jaffray research. Read more
Amazon has launched a head-on challenge to the dominance of Apple’s iPad with a low-price tablet computer, in a move set to intensify competition over the way people consume digital books, music and video, reports the FT. Jeff Bezos, Amazon’s founder and chief executive, said the Kindle Fire tablet would sell for $199 – half the price of an iPad – when it goes on sale in the US from November 15. Amazon’s move will sharpen competition between Mr Bezos, a seasoned technology entrepreneur, and Apple, whose founder Steve Jobs retired last month, as their businesses converge on digital media sales and distribution. John Gapper reckons the announcement equates to “a strategy for a full-scale assault on Apple”. Read more
Amazon has reported a 51 per cent leap in quarterly sales, hailing its fastest growth in more than a decade but seeing net income slip by 8 per cent to $191m as it defends market share, the FT reports. Most analysts remain confident that the company is right to sacrifice profits in the near term to build up better distribution and data centres for its cloud computing services, Reuters says. Operating profit margin has halved from a year earlier. Rivals say that Amazon is benefiting from an unfair sales tax exemption for most of its customers, although the company is facing challenges in some states. California has just begun collecting a new ‘Amazon tax’, the Orange Country Register reports. Read more
Amazon.com, Google, Rhapsody and Spotify are among a raft of media companies whose iPhone and iPad applications have become caught up in new rules being enforced by Apple on how content is sold through its App Store, says the FT. Apple’s guidelines require publishers and retailers to remove links to their own websites from their apps, which have allowed them to circumvent Apple’s 30 per cent commission on digital content purchased on its platform. Developers are concerned that their customers will be confused by the changes, which have left many without the ability to sell content directly from their apps.
Borders will go into liquidation this week, the company has said, ending its run as the US’s second-biggest traditional bookseller, the FT reports. The book chain said on Monday that it would hand itself to liquidators after cancelling an auction set for Tuesday after it failed to find any last-minute bidders for the business. The liquidation signals job losses for Borders’ 10,700 employees and confirms the company’s status as the highest profile US victim of the growing popularity of online book selling and e-reader devices. Announcing the liquidation, Mike Edwards, Borders president, said in a statement: “Following the best efforts of all parties, we are saddened by this development. “We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, e-reader revolution and turbulent economy, have brought us to where we are now.” Read more
Amazon, the world’s biggest online retailer, has called for a referendum in California on the state’s controversial move to tax online shopping, the FT reports. The online retailer, which is based in Washington state, said on Monday that it would support a referendum on California’s move to require Amazon and other online retailers to collect sales tax from customers in the state. The San Francisco Chronicle says a lobbyist for Amazon has filed a petition with the attorney general’s office to begin the referendum process. Requiring retailers to collect the sales tax is estimated to bring in $200m to the state and the measure was part of the state budget recently signed by governor Jerry Brown. Read more
Amazon.com says it is selling more e-books for its Kindle electronic reading device than paperback and hardback print editions combined, helping its book business to see its strongest growth in more than a decade, the FT reports. The news that the online retailer has sold more than three times as many Kindle books so far this year as in the same period of 2010 came as the Association of American Publishers reported that US e-book revenues had grown 146 per cent in March over the same month a year earlier. Amazon only released unit sales data rather than comparable revenue figures, and Kindle editions typically sell for lower prices than print titles. However, the data suggest it may be extending its leading market share in e-books following the release five weeks ago of a cut-price Kindle at $114 for customers willing to accept sponsored screensavers and other advertising. Read more
Apple is now the world’s most valuable brand, surpassing Google to reach an estimated value of more than $153bn, according to a global brands agency, says Reuters. According to Millward Brown’s BrandZ Top 100 rankings, Apple has increased its brand value by $137bn, or 859 per cent, since 2006, the FT says. That contrasts with Apple’s stock market capitalisation of $319.4bn, which is almost five times higher than in 2006. Google’s market capitalisation is $172.4bn. The other big upset of the rankings is Amazon’s edging out of Walmart as the most valuable retail brand, with its brand value rising 37 per cent despite a market capitalisation five times smaller than Walmart, says Advertising Age. Read more
Amazon, the world’s largest online retailer, reported a 33 per cent fall in net income for the first quarter as new investments in data storage and distribution eclipsed a rise in sales, the FT reports. The company had told investors to expect a drop in earnings, but the fall in net income to $201m from $299m was steeper then anticipated – and Amazon warned of a further drop this quarter. Amazon’s shares slid nearly 2 per cent in after-hours trading, having fallen 1.7 per cent in the run-up to the results report at the end of official trading. Tom Szkutak, chief financial officer, continued to champion Amazon’s investment plans. But some analysts are concerned about Amazon’s willingness to sacrifice profitability to fund its young “cloud computing” data storage business as well as new distribution centres for the physical goods it sells. Read more
… how might they be mis-valuing equities?
So asks Themis Trading on Tuesday after discovering this curio of a story from CNN about algo-bots gone wild on Amazon. Read more
Ebay has made a bid to revive sales growth and diversify its business with the agreed acquisition of GSI Commerce, an interactive marketing company, for about $2.4bn, including debt, the FT reports. Growth in Ebay’s auctions business is slowing, and using GSI to help third-party sellers would allow it to compete with Amazon, Reuters says. Ebay will pay $29.25 a share, a premium of 51 per cent over GSI’s closing share price last week, for the Pennsylvania company, which handles the e-commerce activities for large brands and retailers, including the National Football League, Toys R Us and Ralph Lauren, the FT adds. Read more
Amazon is developing a film streaming service that would compete directly with Netflix, the FT says. The company is planning to bundle access to the service with Amazon Prime, a premium service that guarantees customers unlimited free shipping of books and other items sold by the online retailer after paying an initial fee. Engadget released a purported screenshot of the leaked service recently. A source confirmed that Amazon was working on a streaming service. However, Amazon faces an uphill struggle if it is to overhaul Netflix in subscription video. Netflix shares have risen almost fourfold in the past 12 months as the company has built a dominant position in online film viewing beyond DVD subscriptions. Read more
Amazon has once again outstripped its bricks and mortar retail rivals in the holiday quarter, with sales rising 36 per cent and passing $10bn for the first time, the FT says. But the figures were not enough to prevent disappointing operating income forecasts from contributing to a 10 per cent fall in Amazon shares in after-hours trading. Amazon said it expected operating income to decline to between $260m and $385m. Spending high to make acquisitions has dogged Amazon for years, even though such spending has sometimes resulted in huge successes, like the Kindle e-book reader, the WSJ reports. Read more
Breaking pre-market news on Friday,
- Amazon now selling more Kindle books than paperbacks — statement. Read more
Amazon, the world’s largest online retailer, has acquired Lovefilm, the web-based DVD rental service, for close to £200m ($317m), sealing a long-rumoured deal that sees another top UK dotcom company sold to a US suitor, reports the FT. Lovefilm, with 1.6m subscribers in Europe, had been considering a stock market listing as it seeks to expand its business from mailing DVDs into online delivery. The deal comes as Netflix, the US business whose model Lovefilm has emulated, is preparing to use its digital subscription business as a platform for expansion into Europe and other international markets. Amazon plans to retain the Lovefilm brand and says it has no immediate plans to launch it in the US. Read more
Google finally began its challenge to Amazon and Apple’s dominance of the e-books market on Monday, 18 months after it first announced its plans for an online bookstore, reports the FT. Google said that EBooks, formerly known as Google Editions, would launch on Monday with “hundreds of thousands” of books for sale in the US – and almost 3m available for free. The store is expected to arrive in Europe and Asia next year. Meanwhile, as the FT also reports, Google was caught up in controversy over the weekend about its failure to seal a high-priced acquisition of Groupon, an online marketing service for local merchants, with analysts split over whether it had come close to over-paying, or whether it had suffered a strategic setback by not securing the deal. Read more
Amazon says it plans to revamp its international e-commerce platform to make it easier for the company to reach customers in new markets, the FT reports. The online retailer, the world’s largest by number of visitors, operates online businesses in six countries outside the US. It says it has set up a new team that will create “the architectural underpinnings to greatly simplify country expansions”, by translating content into different languages and adjusting taxes, prices and delivery options to better suit customers’ locations. The move underlines the increasing globalisation of online retailing, as companies such as Gap, the US clothing retailer, and Walmart, the world’s largest retailer by sales, seek to use e-commerce sites and cross-border shipping to reach a wider audience. Meanwhile the New York Times reports that retail sales were strong over the Thanksgiving weekend, with online shopping accounting for a high percentage of sales. Read more
Amazon, the world’s largest e-commerce company, is snapping up another successful online rival in the US, with an agreement to acquire Quidsi, owner of Diapers.com, the rapidly growing baby products site, reports the FT. The deal, for about $540m, first reported by Fortune, follows Amazon’s $1.1bn acquisition last year of Zappos, an online shoe and fashion business. Quidsi will end the year with sales of about $300m. Marc Lore, chief executive, has forecast sales will reach $1.3bn by 2012. Read more
Amazon has made an early move to give its Kindle e-reader device mass appeal, with the launch of a $139 wireless-only version, Reuters reports. The new price lies just above the $99 price-tag that analysts believe would tip the Kindle into mass adoption, promising an e-reader price war, the NYT adds. With e-book margins being squeezed and devices becoming cheaper, the publishing industry will have to get more creative, the FT’s John Gapper observes. And using the device itself? Not bad, the FT’s Tech Blog says — but it’s no iPad. Read more
Borders may have gone belly-up in the UK, but Amazon’s recent performance demonstrates it’s not about the books, but the business model:
Amazon’s shares hit an all-time high of $135.25 on Monday, while shares in Barnes & Noble and Borders Group had fallen 2.5 per cent and 9.1 per cent at pixel time, respectively. Read more
Ugly numbers out of Redmond on Thursday. Shares were slammed, falling 9 per cent in after-hours trading.
Per Bloomberg, emphasis ours: Read more
Henry Blodget, one of the highest profile gurus of the dot.com boom, said in 1998 that Amazon would hit $400. The internet euphoria pushed the stock to $600 within months but it collapsed to $5 in 2000. But the stock is now comfortably back above Mr Blodget’s tip. Its $69 stock price translates into just above $400 when you factor in a stock split.
Mr Blodget has wasted little time in pointing this out in his own blog. Read more
Short-sellers are facing growing structural barriers in their quest to profit from share-price declines in the US, a reversal of fortune that helps explain the heavy losses suffered recently by hedge funds that bet against Amazon. The hurdles for short-sellers range from the rise of private equity buyers, taking cheap or poorly managed companies out of the public markets, to the explosive growth of corporate share buy-backs, which are sapping liquidity and exaggerating price moves. The result is that short-sellers are more likely to target better-known companies such as Amazon. US buy-backs so far this year have already hit more than 40 per cent of last year’s record total. Read more