Monday, March 18, 2019

Notations On Our World (Weekly Edition): On @Amazon Watch

As a new week dawns, we could not help but wonder who will be "Amazon'd" as I reflected upon the following courtesy the team at The Financial Times and Fortune Magazine--Will Lyft & Uber be next--especially as Amazon is now in the delivery business too!!!! 


MARCH 1, 2019
Good morning.
Is Amazon killing the retail business?
Gap yesterday announced it was closing 230 retail stores, just a few hours after J.C. Penney said it was closing 27 stores, and a day after Victoria’s Secret said it was closing 53. These announcements bring total store closings this year to 4,500.
But here’s the thing: some of the biggest big boxes—WalmartTargetBest Buy—had stellar fourth quarters. And I’d be willing to bet a $50 gift card that CEOs McMillon, Cornell and Joly would tell you that Amazon made them better. Those companies have become super-focused on their customers, understanding when and what they want to do online, and why they still might want to use a store. And they have profited as a result.
There is a budding school of thought out there, known as the “New Brandeisians” and led by a 29-year-old legal scholar named Lina Khan, that argues that Amazon’s bigness is, in and of itself, bad. I’m no Amazon groupie, and I share fears that a winner-take-most dynamic pervades the technology business. But in Amazon’s case, it’s hard to find the harm. Consumers clearly benefit from the Seattle company’s low prices, its transparency, and its convenience. And the best retailers are now learning how to use its data-obsessed methods to create their own competitive edge.
To be sure, as yesterday’s announcements shows, there will be people who lose jobs, and real estate that will go vacant. That’s creative disruption at work. But it’s not (yet) an argument for shackling the online giant. The case against Microsoft in the 1990s, or for that matter, Google today, is much stronger.
By the way, the Daily Beast reported earlier this week that Khan is being courted for a job by House Democrats—another sign of the Democratic retreat from market economics. A political era that dawned a half century ago, when Sen. Ted Kennedy teamed with now Supreme Court Justice Stephen Breyer to push for airline deregulation, may be coming to an end.
More news below.
Alan Murray

MARCH 4, 2019
The financial world must periodically stand agape at the wonder of “technology” companies as they first reveal their results to the public. Lyft, for example, caused much hoopla by being the first of the expected mega-unicorns to file its IPO papers, as if a first-mover advantage matters in this regard.
So Lyft is speedy. But like its archrival Uber—which has disclosed performance data publicly ahead of its IPO filing—Lyft’s results are atrocious by any objective standards. Yes, it has proven it can grow. It racked up $2.2 billion in revenue last year, about double the year before. But Lyft lost nearly a billion dollars from operations in 2018. Its cash balance declined by $600 million. And while the number of rides it provides continues to tick up, its average revenue per ride is tiny: $3.56 in 2018.
Lyft makes a virtue of its focus. It only provides transportation, primarily through rides in cars but also through bikes and scooters. Revenue from the latter category wasn’t material last year, however. Lyft’s simpler business model will get chewed over by investors as they compare it to Uber’s. The rap on Uber is that the growth in its core business is anemic, while its hoped-for bright spots are its prepared-food delivery and freight forwarding businesses. Lyft has neither of these product lines.
The fine print in Lyft’s offering reveal one tantalizing clue as to just how far away profitability is for Lyft—and likely Uber too. Lyft has more than $3 billion worth of state and federal net operating loss carryforwards (NOLs), an arcane tax-accounting gimmick that gives companies that lose money the opportunity to deduct these losses from income earned in future years. (This trick is available to other investors as well. See here how the current leader of the free world avoided paying taxes in years past.) Lyft says, however, that even though its NOLs don’t begin to expire until 2030 (federal) and 2021 (state), “it is possible that we will not generate taxable income in time to use NOLs before that expiration, or at all.”
In case any of this was a little confusing, let me break it down for you: Lyft is telling prospective investors it might not make money for 11 more years.

Adam Lashinsky

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