Amazon's far-reaching ambitions, lack of profits, unnerve investors

Fri Jul 25, 2014 8:56pm EDT
 
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By Deepa Seetharaman

SAN FRANCISCO (Reuters) - Amazon.com Inc's message to investors has always been clear: trust in founder and CEO Jeff Bezos. But after more than a year of mostly disappointing quarterly results, that faith is being tested.

Some on Wall Street wonder if Amazon may have bitten off more than it can chew. After an unusually busy first half of the year that saw the online retailer spend on developing everything from mobile phones and Hollywood-style production to grocery deliveries, investors are ready to see it curtail its ambitions and start delivering sustainable profits.

Or at least offer evidence that Bezos' ever-increasing investments are going to soon generate appealing returns for its main online retailing business.

"It does get frustrating when they continue to spend quarter after quarter and they don't let the revenue flow through," said Michael Scanlon, who manages $3.5 billion at Manulife Asset Management and holds shares of Amazon. "I'm definitely ready for profits."

Others argue that easing off on the throttle now may thwart its goal of becoming the Wal-Mart of online retail. That is particularly the case as China's Alibaba - which handles more ecommerce than Amazon and eBay Inc combined - slowly develops a U.S. consumer presence and prepares for an initial public offering in the U.S.

BIG SELLING POINT

Bezos insists on taking the long view. In his letter to shareholders last year, he responded to criticism about spending by saying investing in a "just-in-time fashion would be too clever by half."   Continued...

 
Amazon CEO Jeff Bezos discusses his company's new Fire smartphone at a news conference in Seattle, Washington in this file photo taken June 18, 2014.   REUTERS/Jason Redmond/Files