I’m of the opinion, shared by some of my fellow independent publishers, that Amazon will only become a company you can deal with again after their stock price corrects. Talking a 60-70% drop from its peak, a la Netflix. Betting against Amazon’s stock has been a fool’s errand for well over a year now, with the shares soaring even as the company repeatedly and routinely missed earnings targets, but this time, as they say, might just be different. The problems at Amazon are now too big to ignore.
The way to understand Amazon’s business is to look at its cash. And its cash position has not been healthy for a very long time. Its supposed main ebook competitors (apple and google*), have enormous cash hoards, which those firms add to each and every quarter. Apple, for example, just increased its cash holdings to over $80 billion, Google’s at $40 bil., Amazon is now at $6 billion, down from $10 at the start of the year.
Gets even worse, Amazon’s Accounts Payable (the money they owe somebody but haven’t come through with yet), at $6.5 bil., is up $1.7 bil. from a year ago. Their net cash is less than their Accounts Payable for the first time in a very long time. Google’s Accounts Payable stands at around $500 bil., Apple–I don’t know what they owe, but I’m pretty sure they’re good for it.
Some of Amazon’s cash issues might be attributable to the Zappos acquisition. If so, that was a very stupid acquisition. But to list Amazon’s errors over the past couple years would fill a business text.
If this company doesn’t execute flawlessly with Kindle Fire and in general over the next three months, there will be layoffs at Amazon. I’d recommend they start with the folks who think driving customers to third-party sellers via censorship is a good idea. Cut those employees, Mmm’kay?
Disclaimer: we at Disruptive Publishing used to be highly dependent on Amazon for our revenues. Didn’t really have a choice, actually. Since the censorship began, and especially since this summer, when I pulled out all my titles from CreateSpace Enterprise (formerly Booksurge), that has ceased to be the case. At this point, Amazon, while still a significant source of funds for me, is just one revenue stream among many. And after all, pr0n drives distribution. Given Amazon’s 2% profit margins, compared to the 20+% margins enjoyed by Apple and Google, the Seattle-based retailer is just not as monolithic as you’d think, especially as Apple and Google continue to slowly, steadily, profitably, improve their ebook offerings.
*Yes, I’m leaving out B&N as an ebook competitor to Amazon. But Kindle Fire will kill the NookColor, if it hasn’t already. And, really, given that B&N first aggressively courted my titles, then decided to eliminate me, while still owing me money, my only interaction with them at this point is to teach my daughter to laugh like Louie dePalma, so that the pair of us can properly celebrate when our local B&Ns go the way of Borders in a year or two.
**Look, I’m, rooting for Kobo, OK. They seem very nice.