business news in context, analysis with attitude

by Kevin Coupe

Asked about Amazon's long term investment strategy on an earnings call last week - which came after Amazon delivered third quarter profit of $252 million, up from $79 million during the same period a year ago, and revenue for the period that was up 79 percent to $32.7 billion - CFO Brian Olsavsky had a line that Business Insider suggested "best summed up Amazon's thinking:"

"We are honing the businesses that we're in and making them as efficient, as profitable as possible, while also investing very pointedly and very wisely, we believe, in things that will enhance customer experience and create lasting businesses for us down the line."

And there it is. In just 43 words.

The story notes that balancing efficiency and effectiveness is easier said than done, though it has to be acknowledged that Amazon has generally been pretty good at a "two-track strategy where it squeezes as much money as possible from its strongest businesses, while carefully reinvesting profits into new growth opportunities."

We talk about this a lot here on MNB, because Amazon's discipline and simultaneous ambition are difficult to emulate or imitate, especially for companies that have long legacies and traditions of doing things a certain way. Certainly there are readers who think this is overblown, or a bubble of some kind, and that is isn't sustainable.

The investment class often is skittish, which is why last week when Amazon announced those increases, the stock went down because better numbers were expected ... though not achieved because of the company's investments in technology and content.

Though, as Business Insider puts it,"Investors may have simply forgotten Amazon's crazy growth in recent quarters (stock price more than doubled in 18 months) is a result of years of heavy investments."

It is an approach that some people are convinced will work, and some are not. But at the very least, as Amazon creates changes that have and continue to reshape the retail environment, those 43 words are an Eye-Opener.
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