Month: October 2014

Amazon’s £270m Record Loss

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There was an article in the Daily Telegraph recently with the above title. It said:

“More than $15 bn was wiped off the value of Amazon last night, after the online retail giant reported the biggest loss in its history. The company increased sales by a fifth to £20.58 bn in the three months to October, but plunged $437 m (£273 m) into the red as it spent heavily on new projects. That figure is more than 10 times the $41 m loss Amazon reported in the same period a year earlier.

The business has been ploughing money into myriad new schemes as it battles to gobble up market share and tries to compete with rivals such as Apple that are increasingly treading on its turf. Jeff Bezos, Amazon’s chief executive and founder, has authorised the company to spend tens of millions of dollars developing drones and much more on new servers for its online data storage business.

He has also led a spending spree on film and television rights, so that Amazon can compete with the like of Netflix and Hulu, and has reportedly been selling gadgets such as its Kindle Fire e-reader as a loss, in order to build up its base of loyal users.

‘We’ve been for several years now, in an investment mode because of the opportunity in front of us,’ Thomas Szkutak, chief financial officer said.

Shares in the company fell more than 11 pc in after-hours trading in New York, to $278.62, their lowest point in over a year.”

 

As those of you who have read by blog will know, I have mixed feelings about Amazon. When there is something I need for the house or a book I want to buy, I will invariably turn to Amazon for service and price. But, at the same time, I think that Amazon has done a lot a damage to authors and to bookstores.

But, if I set my personal feelings aside, and think about the above announcement with my ex-corporate executive’s hat on, my impression is that Amazon is headed for disaster.

No one has ever built a giant, diversified company on market share alone. The key words in that statement are: giant, diversified and market share alone.

If one thinks of giant, diversified companies which are successful, there is General Electric (which I know reasonably well as I used to compete against them). They are an enormously successful, profit-driven company. Their businesses are mostly ranked among the top three in market share, but they are all profitable. They are all managed by top-flight executives who know their respective businesses very well. They are paid and motivated to increase earnings per share (profit) and the value of GE’s stock.

I think that Amazon could have been quite successful if it had confined its activities to books. It could have sustained a top market share in this sector and worked to make it profitable. But now, it is trying to enter a lot of other businesses and trying to get the top market share, using price as the weapon. This is a doomed strategy. Why? Three reasons:

  1. Price is not a sustainable weapon. Somebody else will always find a way to do it cheaper, if that’s what the customer wants. Meanwhile, the business is bleeding money.
  2. Focus. Executives can pay good attention to only so many things. The more things an executive has to watch, the higher the likelihood that one of those things will go wrong. The secret of diversification is to serve one market. In GE’s case it is the industrial market. What do online data storage, books and drones have in common? Since 1997. When Amazon was first floated, the company has bought about 60 businesses.
  3. Experience. Jeff Immelt has many years’ experience managing huge industrial businesses. Jeff Bezos has no general management experience before he founded Amazon. He worked in computer science, international trade, finance, and internet enabled businesses, but I could find no evidence he had profit responsibility at a high level before Amazon. Information on the rest of the executive team is apparently available only on the proxy report to shareholders. How’s that for transparency?

What do I think will happen?

Well, if Amazon continues to experience losses of this magnitude, shareholders will revolt, and the attitude of Wall Street will turn hostile. As a result, several possibilities emerge:

  • There is shake-up of the executive team (except Bezos)
  • Subsidiaries will be sold to raise cash and to narrow the focus
  • More emphasis will be placed on profit over sales

Interview: John Grisham

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In last Saturday’s Daily Telegraph, there was an interview of John Grisham which I thought was interesting, because of some of the points he made.

According to Wikipedia, John Ray Grisham, Jr., born in 1955 is an American lawyer, politician, and author, best known for his popular legal thrillers. His books have been translated into forty-two different languages.  He graduated from Mississippi State University before attending the University of Mississippi Law School in 1981, and practiced criminal law for about a decade. He also served in the House of Representatives in Mississippi from January 1984 to September 1990.  He began writing his first novel, A Time to Kill, in 1984, and it was published in June 1989.  As of 2012, his books had sold over 275 million copies worldwide.   A Galaxy British Book Awards winner, Grisham is one of only three authors to sell 2 million copies on a first printing, the others being Tom Clancy  and J K Rowling.  Grisham’s first bestseller was The Firm. Released in 1991, it sold more than seven million copies.  The book was later adapted into a feature film of the same name, starring Tom Cruise.

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The interview took place in his loft office in Charlottesville, Virginia.  His interviewers (Peter Foster among them) had tried, without success, to operate the front door intercom.  Coming ’round from the back, Grisham told them, “Sorry, guys, tha’ thing’s been broken for a while. Y’all come round this way”.  There are no agents, flunkies, or receptionist to retrieve his visitors.  His office, where he once hosted a fund-raiser for Hilary Clinton in 2008, is decorated with posters from the movies The Firm, The Pelican Brief, The Client.  There is also a black and white photo from 1993 showing fans queuing around the block to buy a copy of The Client at a Memphis book store.  But Peter Foster says that Grisham recognizes that the world of his heyday has faded, both in the bookstores and in films.  Grisham says that Amazon is drumming the book stores out of business, and the films are no longer being made.  There are five films in development, but “these days the financing always seems to fall through . . . Hollywood doesn’t want to make those sorts of movies any more.”

Foster said that Grisham seems to be genuinely grateful for his monumental success (he still earns $10 million a year), but he is like the big league athlete whose time has passed, but who is conscious that the world has moved on.

As of last week he had a Twitter account, but only because his publishers made him open one.  He says, “I can’t think of anything worse than stopping several times a day and sharing my thoughts and activities with a bunch of people, and I damn sure don’t want to know what you’re doing, so just leave me alone.  I have a Twitter account, but I don’t mess with it.”

He views the rise of Amazon and ebooks in much the same way, equating Jeff Bezos with the ‘Robber Barons’ of the 19th century who established monopolies in order to crush the competition.  “Amazon is driving prices down and they say, ‘We’re good guys, we’ll sell more and everybody makes more money.’  What I want to say is, ‘Hey, I had a very nice career going before Amazon.’

Grisham gets up every morning at 7 am and writes until lunch time.  Every January 2nd, he writes the outline of a new novel, and the process ends on July 1 when he delivers the manuscript for publication in October.

He is a Democrat with some strong political views.  He says that in American politics, “the money is just so rampant and corrosive.  We should call it corruption.  You’re actually buying votes, that’s what you’re doing.  But it’s all legal.  It’s a rotten system and it’s getting worse every year in this country.”

The plot of his next novel is inspired by the shootings of black teenagers by white policemen.  He says he wants to explore the flaws of a criminal justice system in America that imprisons its population at five times the rate of Britain and most other developed countries.  He says that the system, “treats black teenage boys and white teenage boys so differently for the same crimes.  Always drugs.  We have a million black guys in prison now for non-violent drug offenses.  One million.”  He said that the system also comes down too hard on non-violent white collar criminals like Martha Stewart.

I agree with most of what Grisham said, but the article mentions remarks he had made earlier in the week about “old white guys his age who once had too many drinks and looked at some child pornography” ending up in prison.  The case to which Grisham probably had reference didn’t involve ‘some child pornography’; it involved a lot of pictures of children being sexually abused.  In my view, ‘old white guys’ like that ought to go to prison!  Also, I have little sympathy for Martha Stewart who made false statements and obstructed the investigation into insider trading.

Website

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I thought I might remind my readers that I have a website, as well as this blog.

My website is http://www.williampeace.net, and it has just recently been updated.  The website is arranged with a home page, which has a bit about me as the author, but I think that the About section of this blog is more informative.  My blog runs down the right hand column of the home page in real time.  (This blog also runs in real time on my Amazon author’s page and on Goodreads.)  Then, there is one page for each of my novels: currently five and a sixth is about to go to the printer.  Each book page has an image of the cover, a short introduction to the novel and a synopsis.  There are links to a sample chapter, the publisher’s press release, and reviews of the novel.  A link the list of awards which a novel has won are also available.

In some cases, there are links to where the book can be purchased, but my books are available from stock on Amazon and Barnes & Noble.  Kindle versions, in addition to hard copies, are available for all.  My first novel, Fishing in Foreign Seas, is the only one available with a hard cover.  The rest are in soft covers, as this is a good way of keeping the cost and price of a book down.

Comments on my website are welcome!

Review: Orfeo

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I decided to read Richard Powers’ Orfeo (published in January, this year) when it was on the long list of ten novels for the Booker Prize. It has since been omitted from the short list for this year’s prize.

Richard Powers is an American novelist, born in 1957, in Evanston, Illinois. At the age of eleven, he moved with his family to Thailand where he became an avid musician. He began his studies at the University of Illinois at Urbana-Champaign (UIUC) with a major in physics, but he graduated with a BA in English literature, followed by an MA. He worked as a computer programmer in Boston, but he quit that job to devote time to writing. His first novel was published in 1985. In 1992, he returned to the University of Illinois as writer-in-residence. In 2010 and 2013, Powers was a Stein Visiting Writer at Stanford University, during which time he partly assisted in the lab of biochemist Aaron Straight. He was named the Phil and Penny Knight Professor of Creative Writing in the Department of English at Stanford in 2013. He currently teaches a graduate course in multimedia authoring, as well as an undergraduate course on the mechanics of narrative, at UIUC, where he is the Swanlund Professor of English. He has written ten novels and has won a number of literary awards.

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Orfeo follows much of the fictional life of Peter Els, a composer, music professor, and amateur bio-scientist. He dabbles in genetic experiments on bacteria and viruses in parallel with music composition, seeing similarities between the infinite variety of music and basic organisms. Els is driven not by fame or fortune, but by a compulsion to compose a piece of music which will have a lasting, ethereal effect on the listener. When he composes a piece which, for the first time, elicits critical acclaim, he refuses offers to stage it again.

The focus of the novel is on the sinister net of terror-prevention which tries to capture him when he becomes a bio-terror suspect, and which he tries to elude.

One has to admire Powers’ multiple competencies as a musician, as a poet and as a technologist. Nonetheless, this is not an easy novel to read. There are no chapters, and the shifts in scene and timeframe are sometimes difficult to follow. I say Powers is a poet because there are frequent passages of music description similar to:

“Then the damning glockenspiel, mute for three songs, silent for so long that the ear forgets the forecast from song one. Child’s toy, funeral chime, light in the night. A bell from out of the pitch-black; a shock but no surprise. A sound that makes hope sound primitive.”

If one is musically literate, and if one is familiar with the piece about which Powers is writing, I’m sure this would be lovely. (I was a singer, and I enjoy classical music, but never learned to read music.) Powers also uses unexpected nouns and adjectives in his descriptions. Sometimes, these seem very clever; at other times they are confusing.

The character of Peter Els is, for me, difficult to relate to: not because he is a musician or a bio-chemist, but because he seems, until near the end, to be a self-proclaimed, born loser. There are not sufficient likeable features with which to empathise. One shakes one’s head each time he makes a stupid mistake (mistakes which Els himself confesses), but there isn’t enough redeeming motivation for the mistake for us to understand and respect him, nonetheless.

Perhaps Powers was not aiming at any particular market when he wrote Orfeo. If you are an amateur composer or a competent musician and someone who is concerned about the encroachment of authority on our freedom of expression, Orfeo is a must read.