Is Amazon.com, Inc (NASDAQ:AMZN)’s Bezos whacko to buy WAPO?
Amazon.com, Inc (NASDAQ:AMZN)’s business has always been based on cash-flow. In simple words it means that AMZN’s growth is almost always a secret until Jeff Bezos decided to give the world a peek at his plans. In the past, there have been people who have tagged Bezos as crazy. Now that he has announced he will be buying The Washington Post Company (NYSE:WAPO), he is being called that all over again.
Working against margins
Any company’s success is measured to a large extent by its margins. On the other hand, AMZN has almost always has the trimmest margins. By the looks of it, WAPO is in most probability going to wind up the same, largely due to the challenges that the newspaper industry is currently facing.
The fact of the matter is that over the years, AMZN’s profits have not been noteworthy while for instance, companies like Apple have been stashing away cash. Nevertheless, investors have very steadily awarded Amazon because they are aware where its profits are being channelized. Bezos has been using them to invest expansively in infrastructure and expanding the business.
The brilliant business model
The cash-flow business model is what AMZN has always followed. It is a known fact that most of the company’s customers pay via credit card. However, AMZN does not pay most publishers or distributors for 90-days after those books have been bought. This ends-up creating a –ve operating-cycle as Amazon turns its own inventory over 30-40 times annually. It’s a smart way of raking in cash at zero margins.
What’s the CEO up to this time?
So what exactly is Bezos aiming at with the WAPO purchase? Well, at the moment he is keeping that under tight wraps and it will be a while before the world gets to know it. However, we can venture a bit into the guessing game and say that Bezos seems to have a definite attraction towards the Publishing sector. At the beginning of 2013 he had made a significant investment in Business Insider, the online publication. Only time will tell us what he has up his sleeve this time around.