Wednesday, September 28

The Jassy era at Amazon starts with a serious setback, and the fault lies with the electric car: its worst balance in 20 years


Andy Jassy took over Amazon last summer, and he couldn’t have gotten off to a worse start. The e-commerce giant has just announced that for the first three months of 2022 it has had its worst balance sheet in 20 years with net losses of $3.8 billion. The company founded by Jeff Bezos had not recorded a quarter in the red since 2015.

The data. Despite the red numbers, Amazon’s revenues have continued to grow during the first quarter of 2022, but they have done so at the lowest rate recorded since 2001, 7%, with a turnover of about 116.4 billion dollars. By comparison, during the same period in 2021, the e-commerce giant’s revenue increased by 44%.

Why? In the presentation of results, those responsible for Amazon attributed this disaster to the bad macroeconomic situation that the international market is going through as a result, among other things, of the war in Ukraine, the crisis in the supply chain or the inflation that is shaking the most Western countries.

To this should be added other elements not mentioned by the managers, such as the increase in the salaries of their different staff, which they have recently been forced to accede to, both due to union pressure from workers, especially in the United States, and due to the war of talent that exists in the technology sector and that threatens to take away its best professionals.

The main reason. All of the above factors have contributed to Amazon’s poor performance, but the main reason for its quarterly flop is a bad, lousy investment: Rivian. In 2019, Jeff Bezos’s acquired 18% of this electric vehicle manufacturer that aspired to become one of Tesla’s main rivals.

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However, during the last year the automobile brand has not only not met expectations, but has also been particularly affected by the semiconductor crisis, which has meant that only in the first quarter of 2022 the value of its shares has fallen by 50%, costing Amazon $7.6 billion in losses.

From ally to headache. Amazon made a strong investment in Rivian in 2019 as part of a strategic alliance with which the e-commerce giant wanted to electrify its delivery fleet worldwide. To do this, he planned that this company would provide him with up to 100,000 battery vehicles by 2030.

However, the semiconductor crisis has blown up that project and a good part of Rivian’s business, since it has recently had to halve its production due to the lack of components. Another of the investors of this brand, Ford, which owns 12% of the company, has also been affected by its poor results and has lost 5.4 billion dollars because of it, according to CNBC.

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AWS is worth a potosí. The poor results of the group as a whole contrast with that of one of its most profitable divisions, Amazon Web Service, which continues to be a real gold mine for Andy Jassy. The benefits of this business grew 57% in the first quarter of 2022 to reach 6.5 billion dollars, almost a billion more than Wall Street analysts expected. Total revenue was $18.441 million.

Measures to alleviate losses. Those responsible for Amazon have been seeing these poor results coming in recent months, especially in regard to their direct business, which is why they have increased the prices of some of their products to try to cope with the decrease in income, although only in the United States that we know of. There, e-commerce is charging 5% more to sellers on its platform and has increased the price of the annual Prime subscription from $119 to $139.

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However, the poor results of Rivian have made these measures ineffective, so it is expected that Amazon will raise its prices in other products and regions to try to stop the bleeding of losses that its failed investment is causing. Especially since the forecasts for this quarter are not at all rosy: Andy Jassy’s estimate that their income will grow at an even slower rate, and that the 7% increase registered from January to March will fall to 3% from April to June .

Image | Fortune Brainstorm TECH

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