Comparing Apple's with Amazon's...

I just saw this article on forbes.. http://www.forbes.com/sites/pascalemmanuelgobry/2012/10/26/apple-and-amazon-earnings-show-once-again-jeff-bezos-is-steve-jobs-true-heir/

and it just reminds me how desperate journalists are to make ANY story to get some page impressions!

Sadly, it's Forbes so it's meant to carry some weight and many people will go away with this misguided out look.

The problem I suppose is about perspective. Which set of goggles are your looking at these companies with? If you are an investor your just concerned with making money. How you make it is a secondary issue, its just about positive dollars in your mind. Hedge funds, private equity companies, traders etc..have many different strategies to make money that don't have anything to do with the welfare or said mission statement of any company.

Investors can profit from practically anything. All they need is a movement in the share price, be that positive of negative. Its the movement of the share price not the real profits or losses a company makes. For most investors nowadays the welfare of a company is not reflected in its share price so its of no concern. But it is to us the customer. We want Apple, Samsung or MS to continue making the products we like (and to continue supporting the products we have purchased). The reality for us is that we want to invest our consumer cash in a healthy, profitable company. So in reality what is good for us as customers means nothing to investors.

So here we have Amazon which is practically the facebook of retail. They have gone for land grab strategy of minimal margins in order to get market share just as facebook provides free services in return for market share. The long game is the lock in. Just as facebook wants to be the ONLY place you network with people socially, Amazon wants to be pretty much the only place people shop. Both companies use investors greed to fuel their land grabs because both companies could never really compete actually selling services and products at a healthy profit.

Apple on the other hand is simply in the business of making products with a mark up and selling them. No land grab strategy at all. They will have a lower market share in the long run because their not going for that and never have done. The secret is, land grabs based on deceptive pricing. They are basically saying I'm offering you the customer a free or minimal cost service so that I can destroy any competition I have because they don't have access to the credit/investment I can get. The land grab companies hardly ever convert their market share to real cash in the long run. They are simply their for investors gain and have no bearing on weather a company can really work for the benefit of their customers in the long run. (Look at how much money the initial investors made in FB at IPO, yet FB still isnt anywhere near a risk free, solid business despite been valued crazily at IPO).

Amazon do have a great service and at some point in the near future they are going to have to start applying real margins to what they sell because a land grab cannot go on indefinitely. The thing I understand is that in the long run is cash is king. Liquidity is the no.1 problem for businesses and if your not banking that cash your customers and the company are vulnerable. Apple learnt that the first time round, which is why they are very different business to what they were in the 80's.

They horde cash and have margins like they have because its the only way to survive and ultimately give us customers the best service in the long run. In effect us, the customer controls Apple but investors control the destiny of Amazon, Twitter and Facebook. I prefer Apple's arrangement to these other companies because ultimately, Apple has to put us first. That's a nice arrangement I think.