What I find interesting is how Amazon is in all these lower profit margin businesses like hardware and retailing and yet they are still priced like a startup company, even though they are down about 25% from their highest share price. It will be interesting to see what happens with Amazon's share price compared with Apple and Google over the next year to see how the market still feels about each companies growth going forward. I think an Amazon phone has about as much potential for success as a Facebook or other service-branded phone - about none. However, you might be overlooking their drive in trying this. They don't think they're going to make much from the hardware, any more than they make money from Kindle hardware. They want to make money from the use of the device. In Amazon's case, that's by getting more people to buy from Amazon than would have otherwise. They can also take a cut of the ad revenue, much as Google does. They differ from Apple in that Apple, while they make money elsewhere, almost all profits come from the hardware.
Bezos has been clear that he doesn't care about profits in the near term (and that near term has lasted for years). He wanted to keep growing the top line so that the company is a behemoth (which he has largely succeeded in doing), worrying about margins/profits later. This would be another way to boost sales, even if it does nothing for their profits. If he can break even on the hardware and it flops, what does he have to lose? |
