Ganesh - thanks for your message. I agree that comparing Amazon to Microsoft may be comparing apples to oranges - my comments were directed more toward the writer of the previous post, who first made the comparison. But while the business models for Microsoft and Amazon are completely different, I believe that there are some fundamental "good business practices" that one might say that all companies should strive to attain. Two such practices come to mind immediately (and I'm sure if I gave it some thought, I could come up with many more):
1. Generate profits to keep your company going, and to prove to shareholders that you have a winning business model.
2. Be up-front and forthright with shareholders regarding prospects for future revenues and profits - and remember it is better to under-promise and over-deliver.
I would give Microsoft an A+ on both of the above - while I would give Amazon a F on number 1, and a C- or a D on number 2. Bezos is betting the farm - or I should say, betting the shareholders farm, and well, I just don't know of too many "good" CEOs (such as Gates or Grove) that would so readily put their companies in to the risky situation of such high levels of debt and losses. Bezos could quite possibly be overextending his company far beyond what might have been a winning business model. But then again, maybe his approach is correct - that he is way ahead in the internet land grab - and when the dust settles, Amazon will have all the prime internet real estate. We won't know for a few years yet. And currently, I believe that the risk of their business model makes their market cap too high.
Of course, I'm biased, as I currently have a short position in the stock.
Thanks,
-Eric Wells |
