Holy hell, it’s been a year for Amazon. Jeff Bezos’ former-online-bookstore dumped $13.7 billion to buy a bunch of grocery stores, that speaker you talk to in your living room that Amazon makes is really popular and a bunch of server farms Amazon runs generate more than $10 billion in revenue annually.
The confluence of all these things has led to an incredible rise in its stock on the year — one that might be even more impressive than Apple’s slow march toward hitting a $1 trillion market cap (assuming the iPhone X story plays out the way they hope). Amazon is nowhere near as big as Google or Apple, but at the same time, its core business is an online retail operation that operates with razor-thin margins. For the most part, Bezos has gotten the benefit of the doubt from Wall Street, and its strategy of gleefully investing in new operations appears to be playing out as hoped.
Let’s get to the chart:
And with all this, its founder and CEO Jeff Bezos is making a run at becoming the richest human in the Local Group. Amazon is investing in a lot of wild operations, like buying Whole Foods, and all of these big moves are starting to coalesce into something that actually makes a little bit of sense as the company looks to become the backbone of the way people run a lot of their daily lives through the internet. Whether that’s buying stuff online, buying groceries, watching movies, listening to music or even using services that are running on Amazon’s invisible infrastructure, the real Amazon is becoming an absolute force in the everyday life of nearly every internet consumer.
So, because Amazon did all the stuff this year, we’re just gonna run through each one bit by bit, starting off with probably its most important one.
Amazon’s server business is booming
Were it not for AWS, Amazon probably would not have posted a profit in the string of quarters that it did. We’ve noted this before, but here’s the money chart again:
While Amazon is increasingly facing a lot of competition from Microsoft’s Azure, as well as Google Cloud, it was one of the original infrastructure operations that gave birth to modern internet services, helping startups get off the ground with servers that they didn’t have to buy themselves. It was also one of Amazon’s most ambitious bets, and one early example of how Amazon was willing to bulldoze its way into new markets orthogonal to its core business model.
The bet paid off, with AWS now on track to generate more than $10 billion annually. More importantly, that $10 billion annually comes with a pretty healthy margin — though, over time, that margin may slip down. For the time being, though, it’s an impressive business compared to the razor-thin profits that Amazon might generate from its retail operations and a good data point as its media services like video or music start to play out.
And, as usual, recurring revenue is a story that Wall Street loves. Amazon is a company that people will often tell you not to bet against, and its stock is up more than 50 percent on the year thanks to an array of businesses that all appear to be showing growth and the company’s recent-ish ability to turn a profit. Amazon can thank AWS a lot for that.
Amazon’s play for the vocal internet
Amazon also said the Echo, its voice-enabled speaker, was the best-selling product on Amazon for the holiday season, with millions of devices sold. This is a pretty big deal for Amazon, as it may have stepped into one of the single-best new interfaces for the internet as a whole — as well as reducing the friction further for buying stuff on Amazon. And for a service that is essentially the hub of online commerce in the U.S., having an Amazon-sold item is also a pretty good look for the company.
Even if the devices are relatively cheap, locking consumers into the Amazon ecosystem, in the end, is likely much more valuable than selling a bunch of internet-connected speakers. Amazon Prime gives Amazon an opportunity to turn its shoppers from once-in-a-bit purchasers to a reliable stream of recurring incremental revenue. Amazon doesn’t do much in terms of disclosing how Prime performs, but at the same time, a reliable recurring revenue model is something that Wall Street loves — and something that’ll keep them happy and off Bezos’ back.
We’d love to show you a chart here, but the best we’re gonna get is some kind of vague large number from Amazon. So for now, be skeptical, but assume that it’s big and has a lot of potential ramifications for the future of the internet (as much of Amazon’s operations do) — especially as companies like Google and Apple nip at its heels.
Amazon buys a bunch of grocery stores
Amazon made one of the biggest and splashiest acquisitions of the year, second only to Broadcom’s move to acquire Qualcomm and consolidate the fabless semiconductor market into a single unit (which is an equally very large deal). It acquired Whole Foods, a trendy grocery store chain that has a strong brand, for $13.7 billion — and it went through! This was both wildly, in a very Amazon way, expected and unexpected (and was definitely not a good thing for Blue Apron, which was prepping to go public at the time).
Whole Foods gives Amazon a set of local waypoints for groceries, but also storefronts to get its products in front of consumers. It can apply its wealth of data to reorient the prices of products in such a way to get consumers in the door for their staples while getting them interested in other products. And, maybe, more importantly, it can stick its own products in those stores, like the Echo.
While this gives Amazon a big business right away, it also offers Amazon yet another opportunity to lock consumers into the Jeff Bezos Sphere of Influence. We don’t know the full ramifications here just yet, but it’s another example of how Amazon was ready to just crash its way into a new market that sort of makes sense in the Amazon grand scheme of things.
Amazon, in the end, is setting itself up for a future where it serves as the backbone of how consumers interface with products they use in their everyday life that are, in some way, connected to the internet. These moves may seem drastic and have a very long runway to play out, but if you ask a lot of people in tech which stock they would keep from the FAANG group (Facebook, Apple, Amazon, Netflix and Google), you’re probably going to get Amazon as an answer. And then they’ll reference that Tweet wherever that says Amazon grew x thousand percent since it went public (because, in hindsight, I guess we totally should have seen this coming, and the future played out exactly as it was supposed to). So as we head into 2018, we’ll see if Amazon actually fulfills that destiny.
Also, Amazon should buy a coffee shop
Seriously, Jeff, buy a coffee startup. Maybe don’t spend as much as Nestlé did on Blue Bottle. Or do. Whichever. There can only be good things that come of this.
Leading German Far-Right Figure Ditches Party, Converts To Islam
A leading member of Germany’s far-right Alternative for Germany party, known for lamenting “Islamization” of the country, has stepped down following his conversion to Islam, according to multiple reports.
Arthur Wagner resigned from his position in the German state of Brandenburg on Jan. 11 for “personal reasons,” party spokesman Daniel Friese said Wednesday. Friese added that the party has no issue with Wagner’s decision.
It’s unclear what prompted Wagner’s religious conversion. Alternative for Germany, or AfD, rose to prominence beginning in 2015 with the influx of refugees and migrants into Europe. The party worked to appeal to mainstream Germans by stoking fear of a cultural overhaul and a threat to the German lifestyle.
“What they’ve done is create this extraordinary newspeak where all of their positions are justified in terms of liberal arguments about right to an identity, right to a separate culture ― arguments about how far a Western culture can absorb a non-Western culture,” Roger Griffin, an expert on fascism and modern history at Oxford Brookes University, told HuffPost last year.
The party was voted into Germany’s Bundestag, or parliament, for the first time in last year’s elections. It’s promoted policies like the repatriation of 500,000 Syrian refugeesliving in Germany, claiming the Syrian civil war is almost over.
Brazilian Court Upholds Lula’s Corruption Conviction
PORTO ALEGRE, Brazil, Jan 24 (Reuters) – A Brazilian appeals court upheld the corruption conviction of former President Luiz Inacio Lula da Silva on Wednesday, a major blow to the plans of the country’s most influential politician to run for the presidency again this year.
The first two of three judges voted to uphold Lula’s convictions on taking bribes and money laundering and agreed with the prosecutors’ request to lengthen the prison sentence of Brazil’s first working-class leader, who remains free pending future appeals.
Lula, 72, could now be ineligible to stand for election under Brazil’s “Ficha Limpa” or “Clean Record” law, which bans political candidates whose convictions are upheld by an appelate court. However, an electoral court must make the final ruling on a candidacy, and would only do so once a candidate had registered.
Lula can appeal Wednesday’s decision to higher courts to delay a final decision, possibly avoiding jail and stringing the process out long enough to register his candidacy by the Aug. 15 deadline.
Lula is one of scores of powerful politicians and businessmen caught up in sweeping corruption probes that have wracked the Brazilian establishment since 2014.
His exclusion from the election would radically alter the political landscape ahead of a campaign in which Lula is the early favorite, with 36 percent of voter preferences according to pollster Datafolha. That is double the percentage of his nearest rival, the far-right congressman and former army captain Jair Bolsonaro, who has been energized by anti-Lula sentiment.
Brazil’s benchmark Bovespa stock index has risen 8 percent so far this year, propped up by expectations Lula will be barred from the election, clearing the way for a more market-friendly candidate who would stick to Brazil’s austerity agenda.
The Bovespa hit an all-time high on Wednesday as the first of three judges on the court began reading his decision, dismissing a series of arguments presented by Lula’s lawyers.
Brazil’s currency, the real, firmed 1.6 percent against the U.S. dollar, leading gains in Latin America.
Lula faces six other indictments in corruption cases ranging from receiving bribes from engineering firm Odebrecht to obstructing justice and trafficking his influence to obtain government decisions favoring the auto industry. He is among over 100 people convicted in the “Car Wash” investigation, the most sprawling of Brazil’s numerous probes, focused on graft involving oil firm Petroleo Brasileiro and other state-run companies.
Speaking at a union rally on the outskirts of Sao Paulo on Wednesday, Lula told the crowd, “I committed no crime.”
“The only fair decision today would be a 3-0 ruling that I was wrongly convicted and sentenced,” Lula said
Lula was convicted of corruption and money laundering last year for accepting a beachside apartment from an engineering firm vying for contracts with the state oil company known as Petrobras.
Prosecutors said the apartment and its refurbishing was a bribe worth 3.7 million reais ($1.1 million). Lula maintains he never owned the penthouse apartment, criticizing prosecutors for relying on the plea bargain testimony of one witness, businessman Leo Pinheiro.
“His word is not enough to incriminate Lula,” Lula’s lawyer Cristiano Zanin told the appeals court.
(Writing and additional reporting by Anthony Boadle in Brasilia; Additional reporting by Bruno Federowski in Brasilia and Pablo Garcia in Sao Bernardo do Campo; Editing by Lisa Shumaker and Andrew Hay)
Trump Threatens To Pull Aid To Palestinians If They Don’t Pursue Peace
DAVOS, Switzerland (Reuters) – U.S. President Donald Trump threatened on Thursday to withhold aid to the Palestinians if they did not pursue peace with Israel, saying they had snubbed the United States by not meeting Vice President Mike Pence during a recent visit.
Trump, speaking after a meeting with Israeli Prime Minister Benjamin Netanyahu at the World Economic Forum, said he wanted peace. However, his remarks could further frustrate the aim of reviving long-stalled Israeli-Palestinian talks.
Palestinians shunned Pence’s visit to the region this month after Trump recognized Jerusalem as Israel’s capital and vowed to begin moving the U.S. embassy to the city, whose status is at the heart of the Israeli-Palestinian conflict.
Trump’s endorsement in December of Israel’s claim to Jerusalem as its capital drew universal condemnation from Arab leaders and criticism around the world. It also broke with decades of U.S. policy that the city’s status must be decided in negotiations between Israel and the Palestinians.
“When they disrespected us a week ago by not allowing our great vice president to see them, and we give them hundreds of millions of dollars in aid and support, tremendous numbers, numbers that nobody understands ― that money is on the table and that money is not going to them unless they sit down and negotiate peace,” Trump said.
The United States said this month it would withhold $65 million of $125 million it had planned to send to the U.N. agency that helps Palestinian refugees. The UNRWA agency is funded almost entirely by voluntary contributions from U.N. states and the United states is the largest contributor.
A spokesman for Palestinian President Mahmoud Abbas said the United States had taken itself “off the table” as a peace mediator since it recognized Jerusalem as Israel’s capital.
“Palestinian rights are not up to any bargain and Jerusalem is not for sale. The United States can’t have any role unless it retreats its decision to recognize Jerusalem as Israel’s capital,” spokesman Nabil Abu Rdainah told Reuters by phone from Jordan.
Abbas has called Trump’s Jerusalem declaration a “slap in the face” and has rejected Washington as an honest broker in any future talks with Israel. Abbas left for an overseas visit before Pence arrived.
Abbas has said he would only accept a broad, internationally backed panel to broker any peace talks with Israel. The U.S. Ambassador to the U.N., Nikki Haley also criticized Abbas.
Israel’s government regards Jerusalem as the eternal and indivisible capital of the country, although that is not recognized internationally. Palestinians see East Jerusalem as the capital of a future Palestinian state.
Speaking in Davos, Israeli Prime Minister Benjamin Netanyahu said only the United States could broker a peace deal.
“I think there’s no substitute for the United States. As the honest broker, as a facilitator, there’s no other international body that would do it,” Netanyahu said.
Trump said Palestinians had to come to the negotiating table.
“Because I can tell you that Israel does want to make peace and they’re going to have to want to make peace too or we’re going to have nothing to do with them any longer,” Trump said.
Trump said his administration had a peace proposal in the works that was a “great proposal forPalestinians” which covers “a lot of the things that were over the years discussed or agreed on”, without providing specifics.
Trump said his declaration on Jerusalem took it off the negotiating table “and Israel will pay for that”, adding “they’ll do something that will be a very good thing” without elaborating.
Earlier at the World Economic Forum, Jordanian King Abdullah said Jerusalem had to be part of a comprehensive solution.
He said Trump’s decision had created a backlash, frustrating Palestinians who felt there was no honest broker.
But he added: “I’d like to reserve judgment because we’re still waiting for the Americans to come out with their plan.”
King Abdullah’s Hashemite dynasty is the custodian of the Muslim holy sites in Jerusalem, making Jordan particularly sensitive to any changes of status there.
The last talks collapsed in 2014, partly due to Israel’s opposition to an attempted unity pact between Palestinian factions Fatah and Hamas, and because of Israeli settlement building on occupied land that Palestinians seek for a state, among other factors.
Palestinians want the West Bank for a future state, along with East Jerusalem and the Gaza Strip. Most countries consider as illegal the Israeli settlements built in the territory which Israel captured in the 1967 Middle East war.
Israel denies its settlements are illegal and says their future should be determined in peace talks.
The United States has said it would support a two-state solution if the Israelis and Palestiniansagreed to it.
(Additional reporting by Ali Sawafta in RAMALLAH, Ari Rabinovitch in JERUSALEM, Michelle Nichols at the UNITED NATIONS and Noah Barkin and Dmitry Zhdannikov in DAVOS; Writing by Yara Bayoumy; Editing by Mark Bendeich)
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