Amazon invests to compete, profits suffer

Via WSJ: Amazon's Profit Drops 57% as Heavy Spending Continues

The Seattle-based e-commerce giant on Tuesday said its fourth-quarter revenue rose 35% from a year earlier, but profit plunged 57% as the company continued to spend on warehouses, technology and its Kindle electronic devices. Amazon's operating expenses rose 38% in the quarter from a year earlier.

This is an interesting writeup, because it points to the fact that Amazon is working diligently to build up its fixed infrastructure, in the form of warehouses, platforms (hardware and software), etc. that it feels like it needs to have in order to compete with the likes of Apple, Google and Facebook. And despite its good and logical reasons for doing this, financial analysts appear to be only looking for profits. Amazon's ability to take a long-term view of its own rapidly evolving market (in fact it could be argued that Amazon is evolving its own market) continues to be one of its strengths.

However, Amazon appears to be trying to get products out the door and into consumers hands quickly (and working to fix them later), rather than taking the time to get the products to a level of excellence to demand a higher markup. This reminds me more of Microsoft's behavior in the 90's and 00's (which has proven to be unsuccessful relative to the changing market) versus more recent, successful behavior from the likes of Apple.

Apple has been consistently (for the past decade at least) been able to make products that people want to buy at significant markup, thus propelling Apple's profits skyward. This is in no small part due to Apple being willing to spend significant money and time to refine a product until it is "exactly" what people are willing to buy (in large numbers and at a significant markup).

Amazon could do well to make sure they are delivering incredibly awesome products rather than trying to get less awesome products to market in the interest of speed and financial analysts. For example, the Barnes & Noble Nook products, all appear to be more polished and well thought out, and more "Apple-y" than any Kindle hardware Amazon has produced, and given the amount of resources that Amazon can bring to bear, there really is no excuse for that.