Is Amazon the Latest Victim of Apple?

Back in August, we made a list of companies that were collateral damage of Apple’s Creative Destruction. That eventually morphed into a Washington Post column, And then there were none: Apple’s destruction of rivals.

The latest victim of the Apple machine?

The numbers were pretty awful. Q3’s profit disappointment missed by 42%, and that number was, according to Bloomberg, “the biggest negative surprise of any technology business in the Standard & Poor’s 500 Index.” The loss sliced nearly 20% off of its market cap, whacking $20 billion from over a $110 billion cap to under $92 billion.

And next quarter isn’t going to be any better. Projected Q4 losses on the Kindle Fire alone are $200 million dollars; (JPMorgan thinks Amazon can sell 5 million Kindle Fires in Q4) Amazon may be subsidizing the Fire anywhere from $10 to $100 — in the Holiday sales season, the losses are going to amount to a lot of red ink.

I have been an Amazon fan since my geek college roommate gave me a gift certificate for the holidays around 1997. I am a good consumer, a loyal Amazon customer who spend an awful lot of money there each year. I find its free shipping, huge selection and customer service (got to have the magic phone number!) mostly delightful. But Valuation and Accounting have always been Amazon’s Achilles heel. Now it seems as if both of these factors are going to be a drag on what looks like a pricey stock.

Amazon says its building for the future, and to some degree, that has been true. The problem is its been true for 15 years, and the future has pretty much arrived. They must be referring to the next future, the one that is another 15 years off in, um, the future.

Question is how much patience investors have these days.


Daily Amazon

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Monthly Amazon


Amazon’s Apple War Costs Investors $20B
Danielle Kucera
Bloomberg October 26, 2011

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