Consultants Mind

Amazon reported Q4 earnings on Tuesday.  Q4 revenues soared to $21 billion, up 22% Y-o-Y.  Net income was a dramatically different story at $97 million.  Looking at the net margin, it comes out to about 0.5%.  It reminds you of the imaginary quote “Don’t worry about the profits, we will make it up on volume.”

What’s up with the margin? Is it okay to only earn 1/2 of a penny on each dollar?  Amazon CEO Jeff Bezos was on a recent Harvard Business Review podcast and was asked that exact question. His response was pretty sensible,

“Percentage margins are not one of the things we are seeking to optimize. It’s the absolute dollar-free cash flow per share that you want to maximize, and if you can do that by lowering margins, we would do that. So if you could take the free cash flow, that’s something that investors can spend…

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About rianstefan

My practical approach based on experience is to create a website for real Internet users, not for search engine spiders.
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