Amazon is only starting to charge sales taxes in states because they're establishing local presences in those states.

You can't blame companies for operating within the four corners of the law. Perhaps you would prefer that they break the law.

So far as I can tell, today (the past is another matter) Amazon has no issue charging sales taxes as long as buy.com and the rest have to as well.

Best Buy's gains over the last 2 years have been achieved in no small part due to price matching with Amazon including sales tax.

But they've only been unprofitable the last hand few of years. Before that they were quite profitable. Amazon's pursuit of businesses with high R&D costs is the reason for their current lack of profitability.

The first ten years of their operating life were spent being famous for bleeding prodigious amounts of red ink. That's why the tag: Amazon.toast - it was assumed they would bleed to death without the easy money of the public market and a massive valuation.

Here's their net income statement going back to '97:

1997: -$32m; 1998: -$124m; 1999: -$719m; 2000: -$1.4b; 2001: -$567m; 2002: -$149m; 2003: $35m; 2004: $588m; 2005: $359m; 2006: $190m; 2007: $476m; 2008: $645m; 2009: $902m; 2010: $1.15b; 2011: $631m; 2012: -$39m; 2013: $274m

They've never been quite profitable. Only one year, 2004, did they show even a modest level of profitability (in part due to one-time gains). The rest of the positive years the margin was between 1% and 4% typically.

You'll forgive me if I don't trust in the judgment of a business plan built on losing money for two or three decades.

They can be a good company, grow to X hundred billion in sales, struggle to ever make money, and that's all perfectly fine - but it doesn't mean they deserve a hyper valuation. Target trades at a mere $38b valuation, and they only generated $8b in net income the past three years.

People say the enterprise cloud market is a Trillion dollar opportunity world wide in the next decade.

A Trillion dollars up for grabs, and Amazon has a healthy lead in the segment.

When you go to an AWS event the thing that stands out is the number of consulting and service companies that offer integration/application services to enterprises based wholly on AWS. I've been to Google Cloud events and its not even in the same ballpark as AWS. The Amazon lead is huge.

I think Amazon is still a good buy.

AWS is already pricey for what it offers. Raising the margin on Amazon.com's sales requires squeezing suppliers more and raising prices and I'm not sure that outcome will be profitable either.

This has been addressed several times already. Amazon is effectively making profits on several on its key businesses but is effectively reinvesting most of its profits into new infrastructure, distribution centers and new services. The day Amazon decreases that investment ratio, profits will significantly increase. In other words, Amazon is far from being in the red. They are just massively investing.

But everyone is getting tired of AMZN's lack of transparency. Increasingly, buying AMZN is akin to buying the "Bezos is the next Jobs" meme on faith.

http://seekingalpha.com/article/2343265-amazon-com-bezos-ser...

Yes they do. Imagine I have a business which has steady gross margin of 100 dollars per year, but to keep it going so far I have been investing 50 dollars per year (capex). Assume my capex is depreciated over 5 years. So, in a single year, my profit is 50 dollars:

- 100 dollars gross margin - Less 50 dollars depreciation (1/5th of my last 5 years' capex: 1/5 * (50 * 5))

Now, let's say I decide to decrease investment. My next profit will be 60 dollars:

- 100 dollars gross margin - Less 1/5 * (50*4)

So, by decreasing investment I have increased profit.

LOL. VMware has never been able to hold a candle to what AWS is doing. To draw an equivalency between the two is misleading.

The true danger to AWS is not coming from any of their competitors (Azure is a long way from not sucking, and the Google challenge, while serious, only supercharged Amazon's growth).

Their true danger lies in the fact that Amazon doesn't treat their engineering/product employees well enough. The AWS products will suffer from high turnover and poaching if they don't address this.

The problem for Amazon is that Microsoft and Google don't need to profit on Azure and Google Compute the way Amazon does. Microsoft can sell Azure services at low margin and make the rest of their money selling Visual Studio and MSDN subscriptions and whatever else to developers working on sites hosted on Azure, and selling Office 365 and whatnot to companies shifting their in-house resources towards the cloud. Microsoft sells a lot of complements that mean it can get away with selling services on Azure at close to cost and still make money. Google's in a similar position, in that it has other complements (AdWords, services like Maps, Android, etc.) for developers working on its stack, and it has enterprise products like Google Docs as well. Amazon meanwhile is selling AWS products but no strong complements. So being dragged into a pricewar with Google and Azure means a very real chance that they continue to not make a lot of profit on AWS, even if they beat Microsoft and Google.

> Yesterday Amazon said that while its cloud business grew by 90 percent last year, it was significantly less profitable.

Investors aren't scared because AWS is growing too fast, they're scared because profits aren't growing along with it

> The company is taking losses to invest in the future, and Amazon’s 10 percent stock drop today shows that some investors are uncomfortable with that.

While its tough to be sure exactly what motivated that drop, the reasoning sounds accurate. More importantly, it shows a huge part of why public corporations in the US are so broken and may actually be hurting the US's competitiveness.

In a recent study (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1959125) entitled "The Dark Side of Analyst Coverage: The Case of Innovation", the researchers found that publicly traded companies who attract the attention of financial analysts are less innovative. Why? Share prices.

For many in upper management of these companies, their compensation is tied to share prices. Management works hard to keep their share prices high. Further, if share prices drop too much, the Board might decide it's time to start firing their "inefficient" managers. In a worst-case scenario, if a company has value but their share prices continue to drop, they leave themselves vulnerable to a hostile takeover, thus risking everyone's job.

In a publicly traded company, everyone is working together to prop share prices up. How do they do that? Amongst other things, they're much more risk-averse. Taking a risk is a strong signal to the market that you might fail and they reward you with lower share prices. That's why the above paper found that public companies produce fewer patents and of lower value: everyone is so focused on short-term goals that long-term opportunities are at odds with their mandate of maintaining shareholder value.

Curiously, it looks like public corporations can share the same defect that democracy does: people can vote. Sadly, democracies produce mediocre politicians because average voters have average intellect (duh) and can't evaluate brilliant candidates (http://www.livescience.com/18706-people-smart-democracy.html). Rhetoric takes the place of thoughtfulness and we see this with corporations, too.

Frankly, I have no idea how to avoid these dilemmas but pretending they don't exist is surely not good.

Who are the people responsible for tech sector investing at large investment banks? Do they know anything about the operational details of "the cloud," or is their knowledge limited to marketing gimmicks and enterprise parlance?

The fact is, the technical details of cloud businesses are what differentiate them, and ultimately what sway engineering decision makers one way or the other in terms of choosing an offering. Yet I get the feeling that the investors in these cloud companies have no fucking clue what any of these technical details are.

Wall Street is a joke.

There are undoubtedly less-informed participants in every market...otherwise very few trades would ever occur.

Cloud computing is still sort of new. A lot of businesses are still switching from other options, and the cloud industry as a whole is growing rapidly as a result. But that will slow down at some point. That sounds to me like the right time for Amazon to start profiting.

Pretty bad conclusion by the author, particularly given this is Wired. If chip makers deliver more transistors, customers of AWS will use them all up, Amazon will not be able to just sit on their hands and offer up the same computing at a lower total cost.

In the time Amazon's cost for 10 Ghz went down by half, the demand for processing doubled.

Just because computing gets cheaper doesn't mean they have to offer it for cheaper. It's likely competition will force the price down, but the point the parent is making is that the price of service doesn't have to come down as fast as the cost of service does. That would imply more profit without raising prices, merely holding them steady while costs go down.

"It’s invented and then built a nearly $5 billion cloud computing business catering to fickle software developers"

There's very little I can't virtualize in AWS that I might find in a typical rack at a co-lo facility, and in that, AWS has no competitors.

(There are other offerings with varying degrees of awesomeness - Softlayer comes to mind - but bang-for-buck, my company still bets on AWS. My only gripe is I/O and the need for local-SSD-fast disk access for clustered KV database stores, which may finally cause us to start looking elsewhere.)