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Tuesday, November 6, 2012

Amazon At A Loss


Wall Street loves Amazon, banking on what it believes to be a bright future for the world’s largest online store.  But for a leading-edge company that increased its sales by 27% to $13.8 billion in the third quarter to LOSE money ($274 million) seems ridiculous. How does such math add up to optimism in the stock market?

Amazon’s attributing its recent thin profit margins and now a quarterly loss on investments to building warehouses and manufacturing new Kindles. They have been saying for years that their low profits were due to the cut-throat pricing it uses to generate business. Is its attempt to undercut competitors with loss-leader promotions finally taking a toll on itself?

Amazon’s stock has soared over the years at a level not in proportion to its profitability. At some point that bubble bursts or Amazon starts making a real profit.  The bigger question for the book industry is how it will work with Amazon: As a partner or competitor? Right now, it is both. If there was a way everyone can play together, the publishing industry could really take off.

Brian Feinblum’s views, opinions, and ideas expressed in this blog are his alone and not that of his employer, the nation’s largest book promoter. You can follow him on Twitter @theprexpert and email him at brianfeinblum@gmail.com. He feels more important when discussed in the third-person.

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