parislemon:

Amazon will announce their earnings later today. As I outlined in October, the results this past quarter will highlight the difference between Apple and Amazon.

Writes Tricia Duryee:

Here’s one data point: For the holiday period, Apple’s gross margin was an impressive 44.7 percent, up from 38.5 percent a year earlier. Meanwhile, analysts are estimating that Amazon’s operating margin will fall to 1.3 percent from 3.6 percent last year.

44.7 percent versus 1.3 percent. 

What does that mean? It means that even though Amazon should report record revenues, their profit will likely be depressed — probably badly depressed. Why? Because they’re selling things like the Kindle Fire — their most popular product (though don’t bother asking how many they actually sold) — at a loss. 

Like Apple, Amazon has built an amazing business that has revolutionized more than one industry. But context is important. Right now, Apple probably makes more profit in a day than Amazon does in a quarter.

 Which means, by the way, that all the extra value which Amazon creates accrues directly to their customers.

Not to be critical of Apple; they created plenty of value that they don’t capture as well. But that’s been Amazon’s explicit goal from the very beginning. Bezos is just about the only CEO I know of who will brag about having low margins.