Jeff Bezos’ plan for world domination: Lose money
Most big companies, when they post losses quarter after quarter, shareholders get scared. Amazon might be the biggest exception to that rule.
The world’s largest online retailer posted an unexpected net loss of about $7 million in its earnings report yesterday, but the company is still growing; sales jumped 22 percent in the second quarter, same as the one before and the one before that.
Numbers like those keep long-term investors happy, says Shawn Milne, a managing director with Janney Capital Markets. “It’s very difficult to find a company that’s pacing toward, you know, $90 billion in fiscal 2014, and growing close to 25 percent,” Milne explains.
A big part of Amazon’s growth these days is its cloud computing services.
“Amazon doesn’t say how much money it makes off Amazon Web Services,” says Curt Woodward, a senior editor at Xconomy.dot.com. “We don’t really know how much of the Internet Amazon Web Services powers, but in both cases the numbers are presumed to be pretty big.”
Amazon CEO Jeff Bezos is famous for investing big in the company’s core businesses to earn customers’ trust, and for keeping prices lower than everyone else’s.
That’s not exactly a new strategy.
“The core of it is old fashioned, and that’s exactly why it’s so brilliant,” says Ben Edelman, associate professor of business administration at Harvard Business School. “It’s old fashioned but forgotten, so many companies rushing to raise their prices, rushing to collect quick payoffs and Amazon doing very much the opposite of that.”
And its stock keeps rising as long as the company keeps growing. Edelman adds that profits don’t seem to matter to Amazon shareholders, as long as competitors like Wal-Mart and Google don’t cut into its core business.
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