Amazon Is The World's Most Amazing Company

Moneybox
A blog about business and economics.
April 25 2013 5:12 PM

Amazon Stock Soares On Announcement of Falling Profits and Future Losses  

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Jeff Bezos, CEO of AMAZON, introduces new Kindle Fire HD Family and Kindle Paper white during the AMAZON press conference on September 06, 2012 in Santa Monica, California.

Photo by JOE KLAMAR/AFP/GettyImages

Today Amazon reported a 37 percent year-on-year decline in net income which is now down to $82 million. They're telling us that for the second quarter we should expect net income in the range of $10 million to a negative $340 million. Basically, they're making less profit than they made a year ago and the expect to lose money next quarter. Naturally the stock is up almost six percent today.

And it really is natural. The company's press release is headlined "Amazon.com Announced First Quarter Sales up 22% to $16.07 Billion" and the company's clearly articulated strategy is to maximize sales by any means necessary. Those means include low and falling levels of profit. But that's Jeff Bezos' strategy, his persuaded his investors to back the strategy, and he is unquestionably executing the strategy. It's a boon to consumers and a terror to the competition. How do you beat a company that's not even trying to make money? I sure don't know.

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But here's a comparison. Amazon's market capitalization—the price of all the outstanding shares in the company—is about $125 billion today. Apple's is about $385 billion. So Apple is about three Amazons. But Apple earns about $104 million in profit per day. Amazon earns less than that in a whole quarter. Yet Amazon's shares are rising while Apple's are slumping. That's what makes Bezos such a remarkable figure. And I really do think he should be applauded for it. Earning big profits and paying out dividends is boring. Building a company that grows and grows and grows is amazing.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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