Amazon's New Kindle the Newspaper Savior?

Hmm, it sure makes some serious sense that the new "Big Kindle" aka the Kindle DX might be able to save millions of dollars for the newspaper industry.

"Newspapers have been an absolute bestseller on Kindle," Bezos said. "People love waking up in the morning to find that their New York Times, their Washington Post, their Wall Street Journal have been 'automagically' delivered overnight. They like the fact that when they travel their subscription follows them around."

The idea of the Wall Street Journal delivered to a mobile device instead of having to be printed on a piece of paper does sound like a game changer. Suddenly the newspaper company can close all of their massive printing presses, get rid of their trucks, and a lay off all their newsboys. You can just pay for a Kindle subscription and cut out all of the middle man.

The newspaper industry might even be able to buff up their staff because content will be the great differentiator and not manufacturing costs. They might even be similar to software companies with their fat margins since most of the newspaper companys' expensive overhead can be stripped away.

Of course Amazon might be able to get a cut of each paper downloaded as well as selling the device. The only thing they need to do is drop the price to something a bit more reasonable. I think $500 for an e-reader is just too much but $200 sounds just about right. In any case I think Amazon might be on the cusp of a truly Apple-like spurt of growth as the Kindle gets more and more ubiquitous.

Amazon Earnings Very Strong: Could it be that people are avoiding the Gloomy Mall?

Amazon just keeps surprising people even though consumers are supposed to be cutting back.

Amazon.com Inc. said earnings climbed 24 percent to $177 million, or 41 cents per share, compared with $143 million, or 34 cents per share, in the year-ago quarter. That easily beat the 31 cents per share that analysts polled by Thomson Reuters expected.

The company said revenue rose 18 percent to $4.89 billion, slightly higher than analysts' expectations of $4.76 billion.

So they were able to increase the top and bottom line when some companies are facing double digit drops? I think more and more people are just moving their day to day spending from the mall to Amazon and taking advantage of Amazon Prime to save a buck.

I think one factor that might be driving Amazon sales is that malls are now some of the gloomiest places you can go to buy something. I mean Ward Warehouse which is close to my workplace is like a ghost town full of closed shops and restaurants and is mostly made up of darkened hallways and furtive, scared-looking merchants.

If I wanted to pick up some clothes or something I would much rather do a few clicks on Amazon then drive down to a Fallout 3-like wasteland of a mall. Amazon is cheerful and cheap while the mall is full-priced and gloomy. It is not such a hard choice to make.

Ebay Growth Slows to Trickle

Things are looking bleak at Ebay. In their case you get a triple hit:

1. Online auction leader eBay Inc warned in an annual report Friday that it faces difficulty getting former customers to return, adding to the normal challenge of attracting new users to its sites.
-First they can't get old users to come back as well as get new users to try the site. I think there are quite a few people out there that have 4-5 year old accounts and have maybe bought one or two things and then left. There is really no reason to come back to the site only to get sniped a few seconds before they are about to win a bid.

2.Adding to the risks in the coming year is expected weaker consumer spending in each of these three major markets, it said. At the same time, overall growth in the e-commerce market is expected to continue to decelerate, the company cautioned.
-I think that weaker consumer spending will hit Ebay right in the face. I don't think a consumer would go all out to buy a Hopalong Cassidy lunchbox when they can barely pay their mortgage. I also don't think e-commerce in general will weaken as much as they think. Thrifty people will still purchase things online if they can get free shipping or a 30% discount like on Amazon, Big Lots, etc. Consumers will still want to buy things and e-commerce will save that person on gas from going to the mall and provides them savings all in one.

3. Jeffries & Co analyst Youssef Squali said the pessimistic language eBay uses to describe its business prospects reflect a growing awareness that eBay is no longer the only game in town for merchants. Rivals such as Amazon.com are enjoying surging growth in its merchant business as eBay slows.
This one is the scariest things if you were long Ebay. When merchants leave your site they will probably not be coming back anytime soon. That is unless you cut your fees drastically. So you end up losing that person and have to cut margins to bring them back. These merchants may not even come back depending on what Amazon does to counter your fee cuts. I mean AMZN has a retail business to fall back on so they can afford to loss-lead while fees are Ebay's lifeblood.

The worst thing about Ebay is that the stock still seems to be overvalued. You end up paying a 102.17 P/E for 26% revenue growth that will keep dropping year over year unless they cut margin (or buy some non-core e-commerce growth) to compete. Also they end up losing buyers and have a hard time bringing in new ones as well. Add a further drop off in consumer spending and this stock might be in the mid-teens later this year.

Amazon On the Comeback

The best part about this story is there margins are finally going up a bit after tightening for years:

One of the most watch Amazon metric its margins, which is a measure of
how much it profits from the sale of an item.

According to Citigroup analyst Mark Mahaney, Amazon's operating
margin for the quarter was 5.9%, which is "materially higher" that what Wall
Street expected and the result of a more positive contribution from Amazon.com's
international sales.

"This marked the first quarter of year-on-year margin expansion
since the second quarter of 2004," Mahaney said, in a note to clients. He rates
Amazon as a sell.

It is also interesting to see how much of there sales ($1.4 billion for overseas and $1.62 billion from US) is now coming from overseas. A weak dollar might be able to boost Amazon's bottom line going forward.