ad lib from an interview
January 10th, 2005 by boon
i found this blip of information somewhat interesting, that ‘profits’ are presumably the surefire measurement for the health of a company. this is an interview with bob cringley who is a tech journalist.
Amazon gets fantastic publicity for a company that hasn’t actually yet recorded a profit. How do you account for the fact that its stocks continue to rise, with some fluctuations, yet it continues to haemorrhage ever-larger amounts?
I think you’re making a mistake, you’re assuming that profits are desirable. What is the advantage of profit? You just have to pay taxes on it, it doesn’t help grow your business, if it did you would have ploughed it back in and it wouldn’t be profit. What’s happened with these stocks is the market is no longer demanding profitability in order to support the stock price. If the market isn’t demanding that profitability then there’s no reason to have the profit. So they take what would have been profit and invest it into greater growth.
If Amazon.com needed to have a certain level of profit to maintain the stock price – trust me -they’d just adjust the numbers, they’d change their strategy and they would have that profit. But since the market doesn’t require it, it’s pointless to have it, and by not having it they’re able to grow that much faster, because the rule here is, you have to get as big as you can as fast as you can, and the company that does that best is the company that wins.