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Comment by adventured | Hacker News Reader

Exactly. Investors are afraid Amazon has found another low profit business to dominate. If they can't yield even a low margin profit at $80 billion in sales - eg 3% Walmart style, or $2.x billion in net income - why would anyone believe they will at $160 billion in sales. Not to mention they're a 20 year old, unprofitable business.

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The Amazon profitability figures are a bit misleading. Amazon adds a very big revenue generating chunk of company every year that has enormous value. That's effectively their profit. One day, they could decide to keep money in their pockets, instead of investing it, but share holders would only demand that if they thought they could do a better job at investing than Amazon. The market has had enough confidence in AMZN for it to go up by 275% in the past 5 years, compared to 125% for the NASDAQ. It's not clear whether this shows that Jeff Bezos is a better investor than the market, or that the market currently believes that he is and this will eventually correct itself, but momentum definitely seems in Bezos' favour.

And a lot of their profit is essentially reliant on competing by dodging taxes - their margin advantage to the consumer could, in many markets, simply disappear with the closure of a few sales or corporate tax loopholes.

That's not true at all. Amazon charges sales tax in lots of places and it hasn't really affected them much at all.

It's affected them quite a bit especially in expensive large items like TVs which are easier to buy locally but have large sales tax burdens. The business is still growing but slower than it would have without sales tax.

Best Buy's gains over the last 2 years have been achieved in no small part due to price matching with Amazon including sales tax.

That used to be true but they have been collecting sales tax the past few years.

Not charging sales tax in a jurisdiction you have no presence in isn't a loophole, it's an intentional feature at the federal level. States can't legally tax interstate commerce.

Amazon is only starting to charge sales taxes in states because they're establishing local presences in those states.

They skirted the rules for local presence for a long time too. They had an engineering office in California, but were not charging sales tax. The office was a wholly owned subsidiary

IMHO skirting the rules is legal. If you care about Amazon's behavior because of the law you should have no problem here. If you care about local presence for some other reason you should be talking about that instead.

You can't blame companies for operating within the four corners of the law. Perhaps you would prefer that they break the law.

Amazon doesn't agree. They are currently lobbying for Internet sales taxes and have been for at least a few years: http://seattletimes.com/html/localnews/2021778597_amazonlobb...

So far as I can tell, today (the past is another matter) Amazon has no issue charging sales taxes as long as buy.com and the rest have to as well.

One of Amazon's most profitable regions is Washington state, where they are headquartered and pay sales tax out the wazoo.

> Not to mention they're a 20 year old, unprofitable business.

But they've only been unprofitable the last hand few of years. Before that they were quite profitable. Amazon's pursuit of businesses with high R&D costs is the reason for their current lack of profitability.

The first half of their existence was spent as an unprofitable business. If 2014 ends up the way it looks like it will, the net losses will outweigh the net income for the life of the business (it nearly does now).

The first ten years of their operating life were spent being famous for bleeding prodigious amounts of red ink. That's why the tag: Amazon.toast - it was assumed they would bleed to death without the easy money of the public market and a massive valuation.

Here's their net income statement going back to '97:

1997: -$32m; 1998: -$124m; 1999: -$719m; 2000: -$1.4b; 2001: -$567m; 2002: -$149m; 2003: $35m; 2004: $588m; 2005: $359m; 2006: $190m; 2007: $476m; 2008: $645m; 2009: $902m; 2010: $1.15b; 2011: $631m; 2012: -$39m; 2013: $274m

They've never been quite profitable. Only one year, 2004, did they show even a modest level of profitability (in part due to one-time gains). The rest of the positive years the margin was between 1% and 4% typically.

You leave out the fact that they reached profitability years before their business plan called for it, showing excellent and stable growth.

The fact that their net income imploded so dramatically rather proves the lack of stability.

You'll forgive me if I don't trust in the judgment of a business plan built on losing money for two or three decades.

They can be a good company, grow to X hundred billion in sales, struggle to ever make money, and that's all perfectly fine - but it doesn't mean they deserve a hyper valuation. Target trades at a mere $38b valuation, and they only generated $8b in net income the past three years.

Dude, I don't think the Target comparison is apt.

People say the enterprise cloud market is a Trillion dollar opportunity world wide in the next decade.

A Trillion dollars up for grabs, and Amazon has a healthy lead in the segment.

When you go to an AWS event the thing that stands out is the number of consulting and service companies that offer integration/application services to enterprises based wholly on AWS. I've been to Google Cloud events and its not even in the same ballpark as AWS. The Amazon lead is huge.

I think Amazon is still a good buy.

If I total the numbers you present, they had a net $2.2b of positive income (i.e. profit) since 1997. Small profit as a percent of revenue since 1997, but overall profit. The first quarter of this year had an operating income of $108M and the second a loss of $126M. Are you suggesting that the remaining two quarters will have approximately $2.1b of loss?

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