Amazing Amazon

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Last Wednesday, the top executives of the ‘big tech’ companies had to answer to the U.S. Congress. The big question is whether these technology companies will not become too big and too powerful so that other companies will no longer have a fair chance to compete. 

The companies (Amazon, Apple, Alphabet, and Facebook) are more powerful than ever and represent a combined value of about five times the size of the Swiss economy, converted into US dollars.

The chairman of the subcommittee, Democrat David Cicilline, is known as a fierce opponent of the tech giants‘ monopoly position. After the interrogations, he stated in his closing statement that the witness statements confirm that there has been an abuse of power. This hearing may be the first step towards changes in the laws and regulations concerning competition. Yesterday evening the ‘big tech’ companies presented the financial results for the past quarter.

Amazon

After the publication of the first-quarter figures, Amazon warned of a possible loss in the second quarter due to billions spent on protective materials to protect staff from the coronavirus. In addition, additional investments have been made to expand capacity. Since March, more than 175,000 new jobs have been created to manage the distribution of all packages. Amazon benefited enormously in the second quarter from the many online orders during the numerous lockdowns worldwide. Quarterly sales reached nearly $89 billion, a 40% increase year-on-year.

The e-commerce business showed sales growth of 47.8%. In the United States alone, online sales and sales at physical Amazon stores such as Whole Foods Markets grew from $38.65 billion to $55.44 billion.

Turnover at Amazon Web Services (AWS), Amazon’s cloud activities, came to $10.8 billion and operating profit came to $3.36 billion. This is 57.5% of Amazon’s total operating profit. With just over 10% of the total turnover, AWS accounts for more than half of the total profit.

Yesterday, the Federal Communications Commission announced that it agrees with Amazon’s plans to launch a satellite internet system, known as “Kuiper”. Amazon is spending $10 billion to bring more than 3,200 communication satellites into space. This will enable consumers, businesses, and governments to use high-speed broadband internet. Both the results and the outlook of Amazon were much better than the analysts’ expectations. The share was therefore increased by 5.5%.

Alphabet

For the first time in its existence, Google’s mother Alphabet reported a drop in turnover. Turnover fell from $38.9 billion last year to $38.3 billion in the past quarter. The 2% decrease was also due to currency effects. At almost USD 7 billion, however, profit was significantly lower than the USD 9.9 billion profit a year earlier. Due to the many homeworkers as a result of the lockdown measures, sales increased at both the cloud activities and YouTube. However, advertising revenues were lower as many companies made cost savings and lowered their marketing budgets. In particular, the decline in the travel sector was huge. The higher sales in the cloud and YouTube did not outweigh the decrease in advertising revenue. However, the results were in line with analysts’ expectations. 

The other two ‘big tech’ companies Apple and Facebook showed better financial results than analysts had expected.

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