Amazon (AMZN, Financial): One of the leading online shopping portals that started its journey from an online bookstore. As the company matured online, we witnessed the online website Amazon.com establish itself as a leader among the online shopping websites with the largest online product inventory “you name it and they have it” online and not just an online bookseller. The company is also focusing on various other growth areas to boost its revenue. Beside the online ecommerce store, the company has a diversified products and services portfolio that comprises of smartphones, tablets, Cloud-enabled storage solutions, gaming, apps stores, developer kits, etc.
The month of September 2014 seems like a month when Amazon was all in the news. There was a series of product launches by the company. We can surely anticipate a certain growth for the company in the fiscal 2014. Amazon is now in the third quarter of fiscal 2014 and had released its second quarter results earlier. Let us briefly analyze those second-quarter results and then we can discuss the new services that have been launched by the company to propel future growth.
Earnings overview in second quarter
The company recently released its second quarter results for the fiscal 2014. Revenue increased by 23% year over year, to record $19.34 as compared to $15.70 billion in same quarter last year.
The company has not been impressive with the bottom line, net loss of $127 million ($0.27 per diluted share) as compared with net loss of $7 million ($0.02 per diluted share) in the same quarter last year. The company has been very extravagant in its investment budget for various new ventures, which hurt the bottom line. The operating loss in the quarter was recorded to $15 million as compared to operating income of $79 million in the same quarter last year. The management feels this investment is like laying a strong foundation for the future as most of the new ventures for the company are targeting the growth areas. The company is certainly optimistic and is on a roll of opportunistic expenditures for various content and products to leverage future growth.
Laying a strong foundation for the future
A new generation Smartphone “Fire phone” was launched by the company that also provides direct access to online content of Amazon. The phone is available exclusively with AT&T, one of the largest 4G LTE network providers in the U.S. This phone has 32GB storage, available on a two year price plan of $199 or at $29/Month with AT&T next 18. Since the launch of the Fire Phone the Amazon Apps stores have been witnessing exponential growth almost doubled, as users now find more user friendly submission over Amazon Apps with the use of Fire Phone. For mobile gamers, two new games were released by Amazon Game Studio developed exclusively for Fire Phone.
Furthermore, the company released a new subscription service, “Kindle Unlimited,” which now enables subscribers to pick as many books as they want from a highly rich content online library of 600,000 Kindle books. The subscription cost for unlimited access is priced at $9.99/Month.
This month, Amazon launched tablet which is priced under $100 “All-New Fire HD.” The tablet features HD display with quad code processor. The tablet is available in 6” and 7” HD displays that are priced at $99 and $137 respectively with a choice of five different colors. It also includes customary Fire OS 4 “Sangria,” which provides hundreds of added features and packages that provide a new level of experience. Numerous value addition services are provided with the tablet supported by unlimited Cloud storage at no cost. Users can now save unlimited photographs on Clouds that are clicked by front and rear cameras available on the tablet.
Kids continue to avail new products from Amazon, as it launched Fire HD Kids version of the tablet, targeting kids as probable users. The company provides two years guarantee on the kids tablet, even covered for physical damage. The tablet is available in 6” and 7” HD display priced at $149 and $189 respectively. Tablet provides numerous value addition services like “FreeTime Unlimited” bundled with it at no extra cost. FreeTime Unlimited has the content that kids always want to explore that includes characters like Harry Potter, Lightning McQueen, Dora the Explorer, Thomas the Tank Engine and Curious George. FreeTime blocks stores and in-app payments, to prevent kids from incurring online expenditures
Conclusion
The company might be showing heavy losses, but looking into the fact that these losses are mainly due to heavy expenditures that the company incurs for intellectual properties and content that stands as building an asset for the company. The strategic expenditure in various vertical products by Amazon provides value addition to its existing services; this will definitely result in growth for the company as it's building a strong foundation for high rise. Investors who prefer a dot.com company in their portfolio should have a closer look at Amazon and consider it for their portfolios for long-term returns.
