Quote:
Originally Posted by bgalbrecht
Amazon's board doesn't have to care about a short term stock price drop unless they are planning on raising cash via new stock offerings or if they are threatened by a board takeover by some corporate raider/activist stockholder. Since Amazon has been willing in the past to accept losses while they are building the business (7 straight years in the beginning), I expect that if they believe that these losses are really investments in building infrastructure and customer loyalty programs, they'll let Bezo have losses for several quarters before pushing for alterations in the operating model.
I view the things the analyst mentions in the WSJ article, the phone, the set-top box, streaming originals, as items that tie customers into the Amazon infrastructure, walled garden, and loyalty programs, just like the Kindle and Amazon Prime. Amazon knows that the customers who buy these things spend a lot more at Amazon, and if they have to spend a lot of money to get the infrastructure in place, it will pay back not just on the sales of these items.
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You certainly have a point, though as the quote that I posted earlier points out, investors are starting to question if some of these expenditures will lead to new customers. When a company loses money, then the money to cover those losses have to come from somewhere. Usually either borrowing or new investors.