Anyone who regularly reads the thread knows I am not hostile. I don't think, either, my response to you was particularly hostile. If we can't have critical discussion here, where can we? Your remarks (not you, this is not personal) were open for attack. Like mine. Hopefully, out of that, some truth will be uncovered, discovered..
I reiterate that it is one thing to grow a business (revenues) selling items for $8 that cost you $10 vs. growing a business (revenues) a business in which you sell items for $11 that cost you $ 10. Amazon has proven they are great at the former; They have no track record with the latter. How rapid (revenues) do you think Amazon would be growing if they tried to make money right now/raised book prices 20% across the board? A hint, significantly slower than currently...
Although they do a marvelous job getting to know their consumer (for which I give them kudos), it remains to be seen how many consumers are going to be willing to pay Amazon's higher prices (for almost everything) once they try to make money......I fail to see Amazon huge competitive advantage or barrier to entry in their business(es)...I fail to see where Amazon is going to reduce expenses (anytime soon), or how they could (even if they wanted to) given the competition......I do ascribe value to their relationship model, which will aid them no doubt in keeping many of their clients (no doubt, even at marginally higher prices then their competition......but...After last quarter's results, however, one must wonder if some wheels are coming off the cart...growth (revenue)is slowing, my friend..if the stock remains stagnant for another six months, the company is going to have major problems...
It's ironic that your point (seems to be) that the internet is somehow (dethroning) Dell....is it not obvious that Dell, more than any other PC maker, has turned the internet into a selling point, cost saver, and competitive advantage? Believe it or not, some companies from the "old era" are adapting very well to the new one.....I would argue that it is difficult to find any "old era" company that has better adapted its model to the internet...and just think, Dell makes money (and lots of it)...
At some point, the stock price of a company (even internets) will have a fairly equivocal relationship with their future earnings stream. IMO, the rise in internet stock prices has as much (or more) to do with limited stock supply, hype, and, indeed, the greatest technology revolution of our lifetime (which really has no relationship to whether or not a particular company within that revolution is valuable...but it is clear that the internet is valuable for human kind, among others, the almighty consumer)...Markets, in my view, are very inefficient in figuring out how to adaquately allocate investment dollars when major technological revolutions take place....but eventually they do....we are probably already seeing this with many internet companies' stock price struggles the last few months)..The great benefactors of the market's past inability to effectively allocate capital have been the (existing) internet companies themselves...the ones lucky enough to get the IPO out the door....as more and more issues have come out (and will come out), as more and more "old line" companies embrace the Net, and as the future financial possibilities (ie. earnings) became less-opaque, internet stock prices are going to quickly adjust to their proper level....all I can say for some companies is "OUCH"
When it becomes clear that a host of internet companies will not be profitable, or attain low levels of profitability, their stock prices will flatten like pancakes...IMO, it is hard to argue that Amazon has shown (in any respect) that it can be profitable on a consistent basis...believe me, they are trying to get "there" more than your words would indicate...and guess what, they are currently competing in business(es) where profit margin(s) are thin/non-exist (many companies willing to sell at a loss), there is lots of competition, and little or no barriers to entry....Great for the consumer, not so great if you are trying to make money......Geez, their business model (to me) makes the PC environment look downright friendly!
As far the last paragraph you quoted (HBS), sounds like the stuff that consultants charge mega-bucks to teach executives on weekend in New Hampshire...for me, I'll just focus on earnings growth...If Dell ROI of over 170% is a "shackle", "dogma"...call me the Count of Monte Christo..
Be nice, or I'll sic Chuzzlewit on you. If the cat gets his claws in you, look out <g>! |
