WEBVTT - Amazon Will Continue on Path of Growth

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<v Speaker 1>We are definitely focused on earnings. Amazon in particular because

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<v Speaker 1>it's a big bell weather on so many different levels.

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<v Speaker 1>Stucks down five percent tim in the after hour, the

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<v Speaker 1>company sales forecast falling short of estimates, leading to a

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<v Speaker 1>share drop. The guidance assumes one billion dollars of costs

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<v Speaker 1>those related to COVID nineteen. We know the company if

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<v Speaker 1>we were to think about what it's been doing over

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<v Speaker 1>the last sixteen months, just massive investments in trying to

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<v Speaker 1>stay ahead of demand or keep up with demand, especially

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<v Speaker 1>the early part of COVID nineteen. Earnings per share though

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<v Speaker 1>for the second quarter Carol handily beating estimates, coming in

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<v Speaker 1>at fifteen dollars and twelve cents of share, beating estimates

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<v Speaker 1>of twelve dollars and eight cents. And I just wonder

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<v Speaker 1>if it's a readjustment as the economy reopens. Maybe you know,

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<v Speaker 1>streaming and retailers are online retail just asn't happening. Let's

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<v Speaker 1>get to our Bradstone. He is Senior Executive editor of

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<v Speaker 1>Global Technology at Bloomberg News. He's in our San Francisco bureau.

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<v Speaker 1>He is our go to. He's authored The Everything Store.

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<v Speaker 1>He's got an update on that book. It's newest book

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<v Speaker 1>is Amazon on Bound Jeff Bezos and the Invention of

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<v Speaker 1>a Global Empire. It's a great book. Relove brad Stone,

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<v Speaker 1>M brad Stone down five percent? Is this? I'm how

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<v Speaker 1>do you read this? Hi? Guys? First of all, thank you. Well.

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<v Speaker 1>I mean, look, I've been covering Amazon for a long time.

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<v Speaker 1>You know, they're they're always these these unexpected fluctuations, sometimes

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<v Speaker 1>below expectations, sometimes above. You know, I read this is

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<v Speaker 1>probably maybe a bit of an indicator that at least

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<v Speaker 1>that at one point the pandemic for Amazon was ebbing

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<v Speaker 1>and customers had more choices, right, and they were going

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<v Speaker 1>back into stores. Um, I think the company increasingly thinks

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<v Speaker 1>they'll be shopping elsewhere, have other options, and so that's

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<v Speaker 1>why the guidance for the third quarters a little bit weak. Um,

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<v Speaker 1>you know, AWS basically hit its targets, so you know,

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<v Speaker 1>the most profitable and powerful part of Amazon's business is

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<v Speaker 1>forging ahead. But yeah, they're a little light here on

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<v Speaker 1>net sales. Um, they've got that massive distribution center that's

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<v Speaker 1>basically been a cost during the pandemic, and they're building

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<v Speaker 1>more from filment centers and distribution hubs. So you know,

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<v Speaker 1>they missed a little bit, and there's a little bit

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<v Speaker 1>of a course correction. But the one thing that I've

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<v Speaker 1>learned covering Amazon is that today's course correction. You know,

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<v Speaker 1>these things happen in the moment and then by the

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<v Speaker 1>end of the week, everybody forgets about them, because, look,

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<v Speaker 1>this company is growing much faster than retail overall. It's

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<v Speaker 1>still selling hundreds of billions of stuff, Brad, I mean

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<v Speaker 1>the numbers. I always feel like there's a couple of

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<v Speaker 1>companies like an Apple or Amazon, that their numbers are

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<v Speaker 1>just off the charts. Yeah, I mean twenty seven percent

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<v Speaker 1>growth for you know, a company that is valued at

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<v Speaker 1>one point seven or maybe one point eight trillion dollars.

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<v Speaker 1>It's still extraordinary. And look, I the earning stress came out.

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<v Speaker 1>I haven't completely digested them. But that other category where

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<v Speaker 1>the AD revenue is tucked is you know, they've they've

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<v Speaker 1>now twenty five years into the company's existence, are minting

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<v Speaker 1>yet another powerful revenue stream. So it'll be interesting to see, uh,

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<v Speaker 1>you know, so many things, including how that develops, what

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<v Speaker 1>the FTC does with the proposed MGM merger um, and

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<v Speaker 1>then how Andy Jesse's leadership style diverges from Jeff Bezos. Well,

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<v Speaker 1>let's talk about that a little bit, because this is

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<v Speaker 1>we don't know if he's going to be joining the

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<v Speaker 1>earnings call. Is Our Life blog points out Jeff Bezos

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<v Speaker 1>hadn't joined an earnings call since two thousand nine, so

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<v Speaker 1>it's not typical that the CEO for Amazon joints the

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<v Speaker 1>company's earnings call. Um, what is the task that he

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<v Speaker 1>has out ahead of him now to to continue with

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<v Speaker 1>what Jeff Bezos did for for more than twenty five

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<v Speaker 1>years at Amazon. Yeah, I would put it into three buckets. Um.

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<v Speaker 1>One is continuing uh to invent, to to nurture a

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<v Speaker 1>culture of inventiveness. You know, in my two books, and

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<v Speaker 1>particularly An Amazon and Bound as I as I went

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<v Speaker 1>and kind of did the archaeology on projects like Alexa

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<v Speaker 1>or the Amazon Ghost Store, it always starts with Bezos

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<v Speaker 1>and an idea from Bezos, Bezos pushing a team, and

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<v Speaker 1>you know Jeff isn't going away, but he's going to

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<v Speaker 1>be arguably less involved. So how does Jess continue to

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<v Speaker 1>make Amazon an inventive company without the founder and you know,

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<v Speaker 1>chief nerd in the halls the whole time. The second

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<v Speaker 1>thing is corporate culture right. It's like, you know, we

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<v Speaker 1>can argue whether Amazon needs to fix it, but certainly

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<v Speaker 1>it needs to evolve it. You know, they have more

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<v Speaker 1>than a million employees, lots of work work, warehouse workers

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<v Speaker 1>feel trodden upon, You've got unionization efforts at the door.

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<v Speaker 1>So he's got to he's got to create a new

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<v Speaker 1>contract with employees. And then the third thing really quickly

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<v Speaker 1>is is just the antitrust scrutiny. Right, then Jesse will

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<v Speaker 1>present a kind of humbler target, I think than Jeff Bezos,

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<v Speaker 1>the richest guy in the world, but contending with basically

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<v Speaker 1>attacks on all fronts from State A, G S to

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<v Speaker 1>the FDC and d o J to the European Union,

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<v Speaker 1>and a kind of growing bipartisan sense of the big

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<v Speaker 1>tech companies have too much power and it needs to

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<v Speaker 1>be curtailed. Bred Amazon Web Amazon Web Services AWS is

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<v Speaker 1>just a massive business and for years it's allowed Amazon

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<v Speaker 1>to invest in in other things, those things like Alexa. Um,

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<v Speaker 1>what is the next driver of profit at Amazon? Is

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<v Speaker 1>there another AWS that they're working on? Is Alexa that

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<v Speaker 1>you write about so much in your in your most

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<v Speaker 1>recent book, is that starting to show results at least

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<v Speaker 1>on the top line. Yeah, is alexis starting to show results?

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<v Speaker 1>I mean, I think the answer to that is we

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<v Speaker 1>kind of don't know. Um, you know, they opaque right

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<v Speaker 1>to the financial statements are opaque. Um Amazon alexis so

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<v Speaker 1>tied in with other parts of the business. Um. Uh,

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<v Speaker 1>probably not, I would say, I mean, maybe it's close

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<v Speaker 1>to break even. But but you know, one thing that

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<v Speaker 1>you mentioned is like AWS, it is quite profitable, but

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<v Speaker 1>by and large goes to build more AWS. Right They're

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<v Speaker 1>building data centers around the world, and you know, trying

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<v Speaker 1>to expand into new services, making big investments in AI.

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<v Speaker 1>I think that the powerful kind of profit machine here

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<v Speaker 1>is advertising, and those dollars are being used to buy UH,

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<v Speaker 1>to license more TV shows and movies, to create more

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<v Speaker 1>to buy MGM. And then there's lots of other things

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<v Speaker 1>that we frankly don't know about. I mean, we do

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<v Speaker 1>know that they've got a satellite initiative called Project Hyper

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<v Speaker 1>that will compete with Starlink, by bunch of things in healthcare,

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<v Speaker 1>probably a bunch of things in the device business, like

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<v Speaker 1>a home robot. They've been working hunt for a couple

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<v Speaker 1>of years, but we don't quite know what the big

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<v Speaker 1>next hit will be yet. How do you think what

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<v Speaker 1>will be the role I guess is what I want

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<v Speaker 1>to get to is of Jeff Bezos in this company.

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<v Speaker 1>Obviously it's his baby. And even though he's stepped back

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<v Speaker 1>and there's a new officially a new CEO, does he

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<v Speaker 1>still kind of poke around, um Brad? Does he still

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<v Speaker 1>kind of get involved in things? And will that be

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<v Speaker 1>problematic to Jesse or is that necessary to kind of

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<v Speaker 1>keep Amazon being innovative in some ways? So, Carol, my

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<v Speaker 1>perspective on this has changed a little bit. I was

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<v Speaker 1>in the wonderful town of Van Horne, Texas last week

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<v Speaker 1>to see uh Bezos blast off in the sky to um,

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<v Speaker 1>let's just say, imaginatively shaped rockets, and one of the

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<v Speaker 1>things he said, yeah, one of the things, we don't

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<v Speaker 1>need freud here. I'm just gonna say anyway, Family Radio.

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<v Speaker 1>One of the things he said in that press conference

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<v Speaker 1>is that he was going to spend the majority of

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<v Speaker 1>his time on Blue Origin of Space Company and on

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<v Speaker 1>the Bezos Earth Foundation excuse me. And it really made

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<v Speaker 1>me think that he is giving Jasse the running room

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<v Speaker 1>to go operate on his own, and then maybe he's

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<v Speaker 1>going to minimize his time. He's a board member. He's

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<v Speaker 1>the chairman of the board, but I don't expect him

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<v Speaker 1>to really be patrolling the hallways of Amazon anymore. So

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<v Speaker 1>I think, you know that's going to be probably in

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<v Speaker 1>some ways a blessing for Jazz gets to put his

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<v Speaker 1>own stamp at the company, but you know, also a

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<v Speaker 1>little bit of a curse, because obviously a lot of

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<v Speaker 1>the success of Amazon over the past twenty five years

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<v Speaker 1>derives from Bezos's relentlessness and the halo of the founder

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<v Speaker 1>that he has at the company and how he manages

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<v Speaker 1>to push her forward. Because I do wonder is it

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<v Speaker 1>more like an Apple that lost some of it's a

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<v Speaker 1>lot of it's mojo when Steve Jobs left, although it's

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<v Speaker 1>gotten it back under Tim cook in a big ways.

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<v Speaker 1>It didn't lose its mojo, right, but it went through

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<v Speaker 1>a period when he was gone that it was tough,

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<v Speaker 1>or you know, even Microsoft and adjustment after Bill Gates,

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<v Speaker 1>although it has definitely gotten its mojo back. I mean,

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<v Speaker 1>I guess, how do we investors think about this company

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<v Speaker 1>longer term? Yeah? Yeah, you've defined the sort of bomber

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<v Speaker 1>to Tim Cooks spectrum right where or the bomber de

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<v Speaker 1>Satia spectrum? Where will Andy Jassy Land and we don't know, right,

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<v Speaker 1>it's so early. Um, you know this, this this quarter

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<v Speaker 1>isn't a great start at least with investors. But I'm

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<v Speaker 1>sure Amazon is looking at it long term. And Jasse

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<v Speaker 1>is a creature of Amazon. He's been there for more

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<v Speaker 1>than twenty years. And as you say, Bezos isn't going away,

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<v Speaker 1>um and and and says he will continue to work

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<v Speaker 1>on new things. So I don't know. I mean, I

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<v Speaker 1>don't think investors um have any cause for concern. I

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<v Speaker 1>think the big macro things are looking at or things

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<v Speaker 1>like regulatory and and um, you know, whether Amazon can

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<v Speaker 1>continue to hire and retain the best talent. Let's talk

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<v Speaker 1>about that regulatory risk a little bit. What do you

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<v Speaker 1>think is the biggest regulatory risk to to Amazon? Is

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<v Speaker 1>it that regulators come in and say, you've got to

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<v Speaker 1>spin off a wus as its own company. You've got

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<v Speaker 1>to spin off his appos as its own company. Is

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<v Speaker 1>that what that looks like? Now, I'm pessimistic about that.

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<v Speaker 1>You know, breaking up a company is a long, arduous

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<v Speaker 1>process that ultimately happens in the courts. We have a

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<v Speaker 1>conservative judiciary in the in the US that's already sent

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<v Speaker 1>uh an FTC case against Facebook back to the agency.

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<v Speaker 1>I think Amazon, actually, you know, despite maybe the political

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<v Speaker 1>coalition gathered against it, holds a lot of cards. And

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<v Speaker 1>you know, if if if maybe by by legislation, uh

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<v Speaker 1>the U. S. Congress, you know, demands that like Internet

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<v Speaker 1>platforms can no longer um be both a seller and

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<v Speaker 1>a market participant, you know, had the platform and be sellers.

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<v Speaker 1>You know, Amazon is just gonna adjust. They're gonna do

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<v Speaker 1>things like, um, you know, demand that their sellers, uh,

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<v Speaker 1>instead of being independent third party merchants, sell them the

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<v Speaker 1>merch nights and then operate like a more conventional retailer.

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<v Speaker 1>So I actually think there are ways that the company

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<v Speaker 1>can adjust. I think on the margins. Maybe that some

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<v Speaker 1>of the things that they do, the more controversial things

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<v Speaker 1>like demanding sellers give Amazon the lowest price, or harvesting

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<v Speaker 1>the third party data from sellers to decide what to

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<v Speaker 1>put in private label. I think we might see Amazon

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<v Speaker 1>walking away from some of those things, But I don't

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<v Speaker 1>know that that necessarily hurts the company's financial prospect in

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<v Speaker 1>the long run. Hey, Bread, is there anybody that Amazon

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<v Speaker 1>looks over the shoulder at. I mean, it's hard to

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<v Speaker 1>even imagine, But is there anyone globally that they keep

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<v Speaker 1>an eye on as someone who could start to really

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<v Speaker 1>significantly eat into them more largely as a business. And

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<v Speaker 1>I know they're They've got multiple businesses, but I'm just

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<v Speaker 1>wondering who I always think about when I think about

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<v Speaker 1>a company, who are they looking at you over their

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<v Speaker 1>shoulder at right? And I think it's it's different companies

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<v Speaker 1>in different pockets of their business. This company now does

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<v Speaker 1>so much, but in an entertainment it's now Netflix and

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<v Speaker 1>Disney and Discovery with the recent deal, um and and Apple,

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<v Speaker 1>And in retail increasingly Shopify with just catering to brands

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<v Speaker 1>UH and in aws it's Microsoft and Google. So you know,

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<v Speaker 1>in a way, and this is probably one of its

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<v Speaker 1>strong arguments. Sure, I gotta jump in President by getting

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<v Speaker 1>ready to make some comments. Bradstone, though, thank you so

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<v Speaker 1>much time and we so appreciated a Bloomberg News