Amazon’s 2015 Q1: Amazon Phase 2 has begun?
Amazon just celebrated two decades (although you could choose a different “birthdate” if you wanted to do that) with a very successful first (in terms of sales) “Prime Day”.
The company has famously been perceived as being forward-looking…more about the long term than the short term.
One thing that has meant is that they haven’t been making big (or often, any) profits. Investors have been betting that, eventually, profits would happen.
Well, that day is here.
Early today, they did a webcast with their results for the first financial quarter of 2015.
You can listen to a recording of the webcast, and see the slides from the presentation here:
Q2 2015 Amazon.com Inc Earnings Conference Call
Update: here’s the
If you’d prefer, you can also read the
They headline the press release with sales up 20%, but increasing sales is not a surprise for Amazon.
This is the real story, in my opinion:
“Net income was $92 million in the second quarter, or $0.19 per diluted share, compared with net loss of $126 million, or $0.27 per diluted share, in second quarter 2014.”
Look at that one again. The net income changed from a loss of $126 million to a gain of $92 million.
From what I can see (and I’m not a financial expert), there wasn’t anything particularly anomalistic. It doesn’t look to me like they couldn’t continue this for any obvious reason.
In terms of what specifically worked well…most of it. 😉 If you listen to the Q&A part of the webcast (always the most interesting part…you can jump there with a dropdown at the bottom of the screen), you hear that the investors aren’t that concerned with what we buy as customers. It’s more about efficiency, web services, fulfillment centers, and so on.
The press releases is a bit different and calls out items that are part of front-facing relationship with Amazon.
The third generation of the
All-New Kindle Paperwhite, 6″ High-Resolution Display (300 ppi) with Built-in Light, Wi-Fi – Includes Special Offers (at AmazonSmile: benefit a non-profit of your choice by shopping*)
is mentioned.
A big star, though?
Amazon Echo (at AmazonSmile: benefit a non-profit of your choice by shopping*)
There are four bullet points related to the Echo and Alexa…which aren’t exactly the same thing. They talk about the Echo device, but they separately mention the Alexa Voice Service. Here’s the big point on that:
- Amazon opened the Alexa Voice Service to third-party hardware makers, giving them the tools to integrate Alexa into internet-connected devices.
Hypothetically, that means that we could get the Alexa service on other tablets, phones, and other devices.
That, along with the “Alexa Skills Kit” for developers, will, I think, mean that Alexa may become as important to people as answering machines were. You won’t want a home or to stay in a hotel that doesn’t have one (although you may have a portable version on your phone).
Lots of other items get shout-outs…and the
Amazon Fire Phone (at AmazonSmile: benefit a non-profit of your choice by shopping*)
was mentioned during Q&A. Yes, the questioner was basically asking if it was dead and should be swept under the rug, but Amazon sidestepped that a little. I noticed that quite a few people bought them on Prime Day. It is my daily use phone, but it isn’t my favorite phone I’ve ever owned (that would be a Samsung). I’ve been trying to think about how they could give it a unique way to connect to the Echo sales. One possibility might be to do some kind of free tethering. I don’t know how that would work, but if the Echo could connect to the internet through the Fire Phone without the tethering plans you might need on other phones, that would make a difference.
The investors appear to be reacting positively.
Is there a conflict between happy investors and happy customers? After all, investors want a company to make money…and that money comes from the customers, who presumably want to hold on to it.
However…I think that many people have the mistaken idea that people never want to spend money.
I like giving money to people who I think deserve it. I want to reward them…that feels good. 🙂 In fact, I don’t like to feel like I’m taking advantage of somebody. If I got a great deal, but thought it would damage the company…maybe even make them go out of business, I wouldn’t want it.
Yes, there were some complaints about Prime Day on social media. Certainly, there are people who unhappy with Amazon…and it’s possible that percentage will grow.
There are also, though many people who are happy with Amazon.
This doesn’t mean that everything is smooth sailing ahead for Amazon forever. 🙂 That said, I think Amazon may now think they are going in the right direction (and it may be a direction they’ve planned for decades).
What do you think? As a customer, are you concerned that Amazon may raise prices to increase profitability? Or, do you think that you being happy is one of their assets? They didn’t call out Kindle Unlimited (at AmazonSmile: benefit a non-profit of your choice by shopping*) in the press release…what do you think that means? Is it possible this has been part of plan all along…are is that just part of the Amazon mythology? Feel free to tell me and my readers what you think by commenting on this post.
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* I am linking to the same thing at the regular Amazon site, and at AmazonSmile. When you shop at AmazonSmile, half a percent of your purchase price on eligible items goes to a non-profit you choose. It will feel just like shopping at Amazon: you’ll be using your same account. The one thing for you that is different is that you pick a non-profit the first time you go (which you can change whenever you want)…and the good feeling you’ll get. 
Shop ’til you help!
This post by Bufo Calvin originally appeared in the I Love My Kindle blog. To support this or other blogs/organizations, buy Amazon Gift Cards from a link on the site, then use those to buy your items. There will be no cost to you, and a benefit to them.
I Love My Kindle 
July 24, 2015 at 3:15 am |
I doubt that raising prices would be of much help in that Amazon’s major profits were led by Amazon Web Services whose profits increased a whopping 81% over last year. An amazing number coming out of this announcement was the Prime Day numbers: Amazon took in 1.5 billion dollars on Prime Day whereas on a “normal” day it takes in only 250 million dollars. Some analysts believe the purpose of the sale was to get more Prime members signed up and that insiders report that the goal is to reach 100 million Prime members in the near future (current info is thhat there are about 40 million members. Disclaimer: I’m happy as a clam because we are investors in Amazon and our stock prices are climbing dramatically … I’m selfishly hoping the trend continues.
July 25, 2015 at 2:02 am |
Thanks for writing, Harold!
Oh, absolutely! I can’t imagine another purpose for Prime Day…or at least, not another primary purpose, so to speak.
I go back to what I’ve been saying: Prime members are happy customers, and happy customers are Amazon’s most important product. The AWS figures are another example of what I think is Amazon’s other main goal: becoming the infrastructure of the internet. That also goes along with the big growth in third party sellers using Amazon for marketing and fulfillment. In other words…it’s working.
July 24, 2015 at 4:49 am |
I too listened to the conference call — I was particularly impressed with the focus on efficiency and cost control. Amazon robotics also got a mention in response to a question.
I do hope that they come out with a new Fire phone in the fall — it is still my plan to get two unlocked phones: one from Amazon (if they make one), and the flagship that Microsoft has been saying is coming before the end of the year.
The most impressive thing, however, was the stock market response. In after hours trading the price was up over $100 — the last time I checked, it was at $566 — getting up into Google & Apple territory (:grin)./
July 24, 2015 at 5:23 am |
A couple of other observations: 3P sales have risen to 47% of revenue. Much of the Amazon marketplace rides on top of AWS — as features & efficiencies accrue to AWS, they also accrue to Amazon’s eRetail businesses. In commenting about the robots, they mentioned that they are tending to have machines make operational decisions instead of humans (;-) 😦 ???).
July 25, 2015 at 2:08 am
Thanks for writing, Edward!
Right…those are both “infrastructure of the internet” advances. I don’t see any problem with machines making tactical choices (they don’t make strategic ones, usually). Let’s suppose two Kiva robots are approaching each other in an aisle in the warehouse. I’m fine with them deciding which one gets out of the way without having to consult with a human. I think that’s the sort of thing they mean.
July 25, 2015 at 2:05 am |
Thanks for writing, Edward!
Yep…it sounds like the Kiva robot purchase is paying off. I think something substantial with the Fire Phone is possible, although not necessarily a new model. I think the long term trend with Amazon is up, but I don’t think it will hold the recent gains in the short term.
July 25, 2015 at 2:29 am
Yes, and today the news is full of the fact that Amazon has passed Walmart as the largest retailer in terms of market capitalization (:grin) — but as you say that will not hold. Amazon will continue to spend almost all of their net income on future investments. I expect quarterly profits to be erratic for the foreseeable future
July 25, 2015 at 5:31 pm
Thanks for writing, Edward!
I think Amazon and Walmart are conceptual proxies for internet commerce and brick-and-mortar commerce, respectively. My guess is that is what made that story happen…
July 25, 2015 at 3:38 am |
Seems to me that Echo/Alexa may be the next killer app. I’m really enjoying how well both work in our home, and look forward to the day when they largely replace both typing and clicking computer interfaces, especially if I am in any way handicapped by then. In particular, voice control is what it will take to make me care about a watch-sized computer.
July 25, 2015 at 5:36 pm |
Thanks for writing, Man!
Absolutely! When we get the Alexa Skills (being developed by third parties right now), I’m sure we’ll get easy ways to e-mail and text directly from the Echo. My sibling with a physical challenge uses Echos now to turn lights on and off and such. Even a watch is a challenge for some people (they can be hard to put on and remove), and the Echo requires nothing but voice. Hmm…I suspect that some day, the Echo will connect to something that can decode sign language (and perhaps know some general gestures) for those who can’t speak. I can confirm now, though, that the Echo understands my phone using text to speech, so that would be another option.