Amazon CEO Doing It His Way, Not Wall Street’s
There must be something in the water in Washington state that produces contrarian CEOs.
Jim Sinegal, former CEO of Costco, was famous for rebuffing calls by analysts and investors to increase profits by cutting back on wages and benefits for employees. He steadfastly refused and Costco is top of class in the warehouse sector. Recent research from BIGresearch shows Costco as the one chain where consumers plan to increase their holiday shopping this year.
Also known for "thumbing his nose at Wall Street," as Reuters put it, is Jeff Bezos at Amazon.
Ten years or so ago, some analysts were saying that Amazon would never make money, despite Mr. Bezos making the case for the company investing in its future by sacrificing short-term profits for long-term growth. Today, the Amazon CEO is facing some criticism following a weak quarter for selling the new Kindle Fire tablet at a loss so it can compete for market share with Apple’s iPad and Barnes & Noble’s Color Nook. Amazon has been reporting "razor thin margins" for the past few quarters and Mr. Bezos warned that the company may dip into the red in the 4th quarter due to heavy sales of the Kindle Fire.
Chris Cordaro, chief executive and investment officer at Regent Atlantic Capital, is one critic of Amazon’s strategy.
"What they’re willing to do is trade earnings for ever-increasing market share, but at some point you have to make a meaningful profit," he told Reuters. "We can’t be buying something at 100 times earnings. That doesn’t make investment sense."
Bill Smead of Smead Capital Management has a different take.
"Smart people are focused on how much market share they can get of this wonderful action that’s going to happen in the next five to 10 years," he told Reuters. "They’re sacrificing market capitalization now. Who loses? The only people who lose are the momentum investors who are trying to meet short term performance targets."
- Costco Seen Benefiting in Holiday Sales as Shoppers Prove Skittish: Retail – Bloomberg News
- Analysis: Amazon’s Bezos stares down Wall Street again – Reuters
Discussion Questions: Do you have any concerns about Amazon’s latest financial report? Is Jeff Bezos taking his philosophy of future growth too far this time? Is the market share approach the way to go in the digital retailing arena?