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Oozing Investment For Amazon

Oozing Investment For Amazon

Results and Background

Although the results of the second quarter have not been too amazing for Amazon, Chief Financial Officer Thomas J. Szkutak has different plans for Amazon. Even after not putting up a very impressive performance, investment in cloud computing technology by the company will not stop. In fact, they have plans to further spruce up the investments in one of their major domains – cloud computing.

According to unofficial reports, Amazon has plans to spend capex funds to the tune of $850 million on its cloud technology division. This is considered to be a considerable jump from its previous spending of around $650 million on cloud infrastructure. However, it might be difficult for the company to give an exact break down of how much of that investment goes into providing software-as-a-service to its clients as opposed to its retail technology business (running Amazon.com).

Why this sprucing?

One might well argue that since first-quarter results have not been too good, why in the world would Amazon try to further extend its investment here instead of technology. According to financial experts, a company in such a situation should ideally be cutting its spending rather than increasing it. However, it seems that Amazon has quite different plans in mind. With industry giants such as Google, Rackspace, HP, etc. racking up their spending on cloud technology, it is an alarm bell for Amazon not to be left behind in the race. Although recent quarterly results have not been as good as previously for Amazon, they still demonstrate the company’s leadership in its domain. They also demonstrate Amazon’s ability to provide superior software-as-a-service to its consumers on a continuous basis, without compromising on quality.

Other companies mentioned above in this article have deep pockets and are presenting Amazon with tough competition. Therefore, Amazon needs not only to be cautious in its approach, but also aggressive in its spending. Thus, it needs not only to demonstrate increased consumer trust, but also its willingness to adopt long-term objectives. These objectives must also be achievable in every sense.

Although onlookers believe that this is one of the lowest-margin businesses in the entire industry, and thus companies like Amazon should not be spending so high on infrastructure, there are also counter views existing in the market. With increasing dependence of consumers on cloud infrastructure, and with the majority of the big companies moving their IT to cloud platforms, companies such as Amazon have amazing opportunities for growth lying in front of them. What they really need to have at the current point in time is a long-term vision of growth. In line with the same vision, it seems quite a logical decision for Amazon to increase its investment, even after receiving unspectacular results in one particular quarter. After all, it will be the staying horse that finally wins the race, and Amazon has enough potential to be exactly that.

By Kaamil Nakhasi

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