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Comment by 1vuio0pswjnm7 | Hacker News Reader

"Amazon had about $35 billion in cash and cash equivalents and long-term debt of about $59 billion at the end of the third quarter ended Sept. 30."

https://www.reuters.com/business/retail-consumer/amazon-secu...

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Yesterday Jan 3, Amazon borrowed another $8B at 0.75% plus SOFR (which is basically Fed Funds rate at ~4.3%) through a short term credit facility.

Also, Amazon has ~$69B in long term lease liabilities. That’s about ~3x the combined long term lease liabilities of Walmart and Costco (~$20B combined). Walmart and Costco are the world’s #1 and #3 retailer, Amazon being #2.

From the beginning when Jassy took the job, the problem has always been the cost of the excess warehouse capacity. Once they realized the true demand from this holiday season, they can now rightsize capacity for 2024 and beyond. Until then, they need to tighten the belt. Just like if you realized you swallowed a bigger mortgage than you can handle.

“The last issue relates to our fixed cost leverage. Despite still seeing strong customer demand and expansion of our FBA business, we currently have excess capacity in our fulfillment and transportation network. Capacity decisions are made years in advance, and we made conscious decisions in 2020 and early 2021 to not let space be a constraint on our business.”

- Brian Olsavsky CFO Apr 28, 2022 earnings call

>Also, Amazon has ~$69B in long term lease liabilities. That’s about ~3x the combined long term lease liabilities of Walmart and Costco (~$20B combined). Walmart and Costco are the world’s #1 and #3 retailer, Amazon being #2.

Long term lease liabilities are next to meaningless for any kind of analysis because it's the sum of rent due at any point after the next 12 months. Could be at the 13th month. Could be at the 13th year. I am not an accountant but I believe you could sign a 50 year lease at $1m/year, that can be terminated at any time by paying a $1m penalty, and it would still show up as a $49m long term "liability".

Instead of your speculation, let me be the expert to explain your speculation is wrong.

1. ASC 842 states that lease liabilities should be measured by lease terms that are non-cancellable. In this case, these are Amazon’s non-cancellable leases.

2. The average lease term remaining is ~9-11 years for Amazon.

3. Lease liabilities are present value calculations, ie. They are not as you suggested 50 years x $1M/yr. They represent the present value of the discounted cash flows. The discount rates are disclosed.

Leases notes from latest Amazon 10-Q: https://www.bamsec.com/filing/101872422000023/1?cik=1018724&...

"Amazon's income dipped toward the end of 2022 as the economy took its toll. The tech giant spent billions doubling the size of its fulfillment network during the pandemic, a play that served it well initially but that proved to be short-sighted.

Amazon was forced to shut down or delay plans for over a dozen facilities as e-commerce sales last year grew slower than expected. Another headwind - soaring energy prices - impacted Amazon's business in a major way, with the company's spending on shipping climbing 10% to $19.9 billion in Q3 2022.

To cut costs, Amazon plans to reduce its workforce in early 2023, reportedly by as much as 10,000 employees."

https://techcrunch.com/2023/01/03/amazon-secures-8b-loan-ant...

"In October, Amazon disappointed Wall Street with a holiday season forecast that woefully missed analysts' expectations. The company's stock fell about 50% last year.

Like Jassy, a number of other tech founders and CEOs have since admitted they failed to accurately gauge pandemic demand."

https://www.cnn.com/2023/01/04/business/amazon-layoffs/index...

May 15, 2021 - "The question, in view of these results, is what kind of world we are heading for after the pandemic. The company's vision points to a major consolidation of e-commerce as we adopt new habits brought about by the pandemic, to the point of becoming a trillion-dollar industry in the United States."

https://www.forbes.com/sites/enriquedans/2021/05/15/amazon-r...

August 24, 2020 - "The questions that IBM's report aims to answer is how much of this pandemic-fueled online spending is a temporary shift and to what extent is it impacting longer-term forecasts? The answer, at least in this estimate, is that this pandemic pushed the industry ahead by around five years. The shift away from physical stores was already underway, but we've now jumped ahead in time as to where we would be if a health crisis had not occurred."

https://techcrunch.com/2020/08/24/covid-19-pandemic-accelera...

https://web.archive.org/web/20200824070131if_/https://www.ib...

It's fair that you edited out the confused commentary, but I'll leave this note that cash is an immediate/near-term asset and long-term debt is a long-term liability. Duration mismatch is important for a company that attempts to maximize free cash-flow.

Yes, but the stock price is based on using that money efficiently, and building an engine which can (at least if desired) generate profits. And when 50% of corporate employee comp is RSUs... a stock price collapse is a huge pay cut for the rest of your workforce.

Is it good to give 100% of your corporate employees a 25% pay cut, to avoid 5-10% layoffs? I think that's a less clear-cut value call.

What do you think people should be taking from this?

I'm not in finance, but I suspect the rates of return on the cash and the debt are quite relevant.

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