Is Amazon Better Run?
July 27, 2018 by Douglas A. McIntyreAmazon.com Inc. (NASDAQ: AMZN) announced earnings that were, for the most part, better than expected. It has started to fire on all cylinders, which means that its many divisions and products lines are doing well. Amazon has become a diversified conglomerate, and its success is a testament to how well it is run.
The numbers:
Net sales increased 39% to $52.9 billion in the second quarter, compared with $38.0 billion in second quarter 2017. Excluding the $760 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 37% compared with second quarter 2017.
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Operating income increased to $3.0 billion in the second quarter, compared with operating income of $628 million in second quarter 2017.
Net income increased to $2.5 billion in the second quarter, or $5.07 per diluted share, compared with net income of $197 million, or $0.40 per diluted share, in second quarter 2017.
Amazon always posts a long list of its major successes. The list hit 40 for this quarter, and not a single one was window dressing. The good news ranged from the fast-growing cloud business know as Amazon Web Services (AWS) to the success of its new consumer electronics products powered by its artificial intelligence Alexa to its sharply improved e-commerce revenue in both North America and internationally. The only major drawback was more losses at its international business.
Amazon management has added more and more programming to its Prime streaming media business. AWS continues to add more complex features for companies that want to host data and analytics with it. Amazon has pushed further into the grocery and fashion business. Many of the company’s units are moving into new countries.
Amazon is known for innovation, but to manage its vast product lines successfully, the logistics of moving products to customers and the challenges of strong competitors have to be backed by extremely competent execution and discipline. While founder Jeff Bezos is the face of the company, the number of talented people under him has to be extremely large, well trained and motivated.
Amazon has become one of the most complicated large tech companies in the world. Behind the scenes, its success requires as much blocking and tackling as innovation.
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