Bezos: Why it won't matter if Fire Phone flops

[zebradude]

Originally Posted by tubemonkey

Which one do you have? I have the Easter Island dudes.

I believe these guys eat monkeys?

[DuckieTigger]

Originally Posted by David Munch

I guess that AT&T payed some money to get exclusive sales, and Amazon anticipated that their fans would do anything to get the phone.. But I think the biggest problem is that they seem to have produced piles and piles of these phones, without being able to sell them.

Unless their intent was always to sell a lot of them for cheap the first time around. Make them so expensive that they are unattractive, then dump them out at a slight loss. Google's Nexus devices used to be cheap, but still relatively powerful. This year they went relatively expensive. Amazon might just do it the other way around - start out expensive and powerful and adjust over time to slightly less powerful and a lot cheaper. It is no coincidence that the Fire phone sale happened during the busiest shopping season. Amazon did not just realize - oh crap, our warehouses are still full of phones, let's sell them now - no they planned to sell them out right then and there. How much missed sales did that cost the competitors? And how much money did they lose compared to Amazon reducing their losses? One lost iphone sale is more expensive to Apple than
Amazon giving away a Fire phone for free.

[tubemonkey]

Originally Posted by zebradude

I believe these guys eat monkeys?

They wouldn't dare, 'cause I'm protected by the:

[Fbone]

Originally Posted by fjtorres

Amazon has billions of cash reserves and even more in untapped credit.

edited

For those curious.

Liquid assets as of Sept/Oct 2014:

Costco $7.3 Billion
Amazon $6.8 Billion
Walmart $6.7 Billion
Best Buy $3.1 Billion
Target $780 Million
Staples $770 Million

Microsoft $89.2 Billion (all time high)
Google $62.2 Billion (all time high)

[SteveEisenberg]

Originally Posted by rcentros

Stagnation is more deadly.

Companies do need to continuously improve in their core businesses. Stagnation there will be deadly. But getting into all-new business lines can also be deadly. The great contrarian example is the buggy whip business, where most firms tried to break into auto parts, and failed, while Westfield Whip seems to chug on nicely.

Here's a prediction it's almost certain I won't be around to know whether it will pan out: In fifty years, Proctor & Gamble will still be emphasizing detergent sales, and still be in the black. And Amazon will, if still around, have gone through at least one bankruptcy.

[SteveEisenberg]

Originally Posted by Fbone

For those curious.

I'm curious as to your source.

EDITED: I just realized that the way to find out the information is to google the name of the company plus the words:

cash equivalent

I didn't find a single source for all your information, but see your figures mostly look good, although I'm finding lower numbers for Microsoft and Google.

COSTCO: Please take that money you have sitting there earning next to nothing and give everyone a free year of membership.

[fjtorres]

Originally Posted by Fbone

For those curious.

Liquid assets as of Sept/Oct 2014:

Costco $7.3 Billion
Amazon $6.8 Billion
Walmart $6.7 Billion
Best Buy $3.1 Billion
Target $780 Million
Staples $770 Million

Microsoft $89.2 Billion (all time high)
Google $62.2 Billion (all time high)

Don't forget Apple at $150B+.

[zebradude]

Originally Posted by tubemonkey

They wouldn't dare, 'cause I'm protected by the:

[wizwor]

This is more fun than I expected...

General Electric Co (NYSE:GE)
Cash and Cash Equivalents
$90,439 Mil (As of Sep. 2014)

Definition
Cash and cash equivalents are the most liquid assets on the balance sheet. Cash equivalents are assets that are readily convertible into cash, such as money market holdings, short-term government bonds or Treasury bills, marketable securities and commercial paper.

Explanation
A high number means either:

1) The company has competitive advantage generating lots of cash
2) Just sold a business or bonds (not necessarily good)

A low stockpile of cash usually means poor to mediocre economics.

There are 3 ways to create large cash reserve.

1) Sell new bonds or equity to public
2) Sell business or asset
3) It has an ongoing business generating more cash than it burns (usually means durable competitive advantage)

When a company is suffering a short term problem, Buffett looks at cash or marketable securities to see whether it has the financial strength to ride it out.

Important: Lots of cash and marketable securities + little debt = good chance that the business will sail on through tough times.

Test to see what is creating cash by looking at past 7 yrs of balance sheets. This will reveal how the cash was created.

[leebase]

Originally Posted by DuckieTigger

Amazon did not just realize - oh crap, our warehouses are still full of phones, let's sell them now - no they planned to sell them out right then and there. How much missed sales did that cost the competitors? And how much money did they lose compared to Amazon reducing their losses? One lost iphone sale is more expensive to Apple than
Amazon giving away a Fire phone for free.

Surely Amazon is in no trouble due to the FirePhone flop. However, there is no way they PLANNED for it to flop so they could do a firesale (pun intended) to get rid of unsold product.

And yes, the dumping of the unsold product onto the market at cheap prices does affect the competition. Just not likely to be the competition you named -- Apple. Folks that are shopping on price are not the ones buying iPhones in the first place. Samsung, HTC, LG will take a hit as some low end buyers will opt for the Firephone on FireSale rather than theirs.

[DuckieTigger]

Originally Posted by leebase

Surely Amazon is in no trouble due to the FirePhone flop. However, there is no way they PLANNED for it to flop so they could do a firesale (pun intended) to get rid of unsold product.

Yes, you can hope for the best and make out like a bandit. Or you can hope for the best and make contigency plans in case of a flop. The dumpout was planned, I am sure. As contingency.

And yes, the dumping of the unsold product onto the market at cheap prices does affect the competition. Just not likely to be the competition you named -- Apple. Folks that are shopping on price are not the ones buying iPhones in the first place. Samsung, HTC, LG will take a hit as some low end buyers will opt for the Firephone on FireSale rather than theirs.

Apple loses marketshare every day. I don't really think they care much - when they sell a phone they make their profit and wait for the next to sell. They are happy in their corner as long as they can pile up more cash. I am glad you are so convinced that every single iPhone user stays with an iPhone until death do them part. It is far more realistic to assume there are open minded people on both (all) sides (android, ios, win) - not only fanatics that will never switch.

[leebase]

Originally Posted by DuckieTigger

Apple loses marketshare every day. I don't really think they care much - when they sell a phone they make their profit and wait for the next to sell. They are happy in their corner as long as they can pile up more cash.

Or perhaps they are happy making the best products they can and are proud of and they let the marketshare fall where it may.

Originally Posted by DuckieTigger

I am glad you are so convinced that every single iPhone user stays with an iPhone until death do them part. It is far more realistic to assume there are open minded people on both (all) sides (android, ios, win) - not only fanatics that will never switch.

So...putting words in someone else's mouth is being "open minded"?

I never said that iPhone buyers wouldn't consider the Fire Phone due to it "not being Apple". I said that iPhone buyers are not the ones buying on price and thus are less likely to be swayed by the dumping of the unsold Firephone stock. The same would be true of Mercedez buyers unlikely to be swayed if the Ford Festiva gets marked down half price.

Is it such a stretch to imagine that those who will take Amazon up on the Fire Phone, now that it's cheap, are those that were in the market for a cheap phone in the first place?

[rcentros]

Originally Posted by SteveEisenberg

Here's a prediction it's almost certain I won't be around to know whether it will pan out: In fifty years, Proctor & Gamble will still be emphasizing detergent sales, and still be in the black. And Amazon will, if still around, have gone through at least one bankruptcy.

It's like comparing apples and oranges. Proctor & Gamble is buying established businesses. (They've also ventured away from their core market in the past.) Amazon is a technology company that has to be on the cutting edge. They have to explore new markets if they want to survive -- or, I suppose, they could buy soap companies and get into the grooming product business.

As for predictions for 50 years in the future ... there's not much more that can be more worthless than that -- especially for an old goober like me who won't be around. I, personally, predict that flying monkeys from Saturn will have taken over the world and implanted telepathic chips into our heads, and those chips will be sold to the monkeys by Amazon.

[fjtorres]

Anybody looking at Amazon's finances seriously just needs to see this to understand what Bezos is doing:

http://ycharts.com/companies/AMZN/free_cash_flow

Free cash flow is the amount of cash generated by a business that is available for distribution among its security holders. Security holders include debt holders, equity holders, preferred stock holders, and convertible security holders. Specifically, free cash flow is used to pay dividends, make acquisitions, develop new products, invest in new property, plant and equipment, pay interest expenses, and reduce debt.

Note the pattern: they generate big flows and then spend them, actively trying to end the fiscal year at zero or lower.

From the horse's mouth:

http://www.bloomberg.com/news/2013-0...investors.html

Amazon is spending to improve a network of warehouses and enhance cloud-computing facilities that give customers a cheap and safe way to outsource data centers. Operating margin is estimated to be 1.8 percent this year, down from 4.6 percent in 2009, after a building boom to lure cloud customers and boost online product sales. Bezos said those investments ultimately will add to free cash flow that totaled $2.09 billion in 2011.

This year, cash flow per share from operating activities for Seattle-based Amazon is expected to rise 65 percent to $10.68, from an estimated $6.48 in 2012, according to data compiled by Bloomberg. Operating cash flow is what a company spends on regular business operations, which can include depreciation, amortization and changes in working capital. Free cash flow excludes capital expenditures.

Meeting customers’ demands, even if that means lowering prices to build loyalty, will boost free cash flow over the long term, Bezos said.

Look behind the curtain of capital spending and Amazon generated $2B in free cash in 2011 and is on track to double it by 2015. Stop investing, and that would result in $4B taxable profits.

[DuckieTigger]

Originally Posted by leebase

Or perhaps they are happy making the best products they can and are proud of and they let the marketshare fall where it may.

That is the same thing as not caring. They are only interested in the high margin high end part of the phones. There will always be a place for them there no matter how big or small that market is - even if the mid to low end phones become more and more powerful.

So...putting words in someone else's mouth is being "open minded"?

I never said that iPhone buyers wouldn't consider the Fire Phone due to it "not being Apple". I said that iPhone buyers are not the ones buying on price and thus are less likely to be swayed by the dumping of the unsold Firephone stock.

As many as there are iPhones I highly doubt those are only buyers at full retail price. If it wasn't for subsidized phones, there wouldn't be as many iPhones around. The same is true for high end phones from Samsung, HTC and the like.

The same would be true of Mercedez buyers unlikely to be swayed if the Ford Festiva gets marked down half price.

There is you not being open minded - a Mercedes does have a reason to be more expensive - it is a whole different class of vehicle. You are trying to say that the iPhone is like a Mercedes and a Fire phone merely qualifies as a Festiva or Fiesta? That is a pretty big hype for an iPhone. Did you ever see a subsidized Mercedes at the new car dealer that low income people can afford?

Is it such a stretch to imagine that those who will take Amazon up on the Fire Phone, now that it's cheap, are those that were in the market for a cheap phone in the first place?

No that is not a stretch at all. However it is a very big mistake to think that those were the only ones interested.