Amazon getting better? taking huge risks

Amazon continues to be the largest e-commerce firm in the world and the largest seller of e-readers. It has 22% of the tablet market in the United States, has aggressively attacked the video-on-demand market, maintains a huge store for Google Android Apps and, most impressively, has attacked the global cloud and online infrastructure industry with its Amazon Web Services. The plan for AWS is for it to power a massive portion of the world's big data projects with hardware, servers software and server administration services. Amazon means, in other words, to operate an extraordinary portion of global Internet activity. CEO Jeff Bezos believes that this part of Amazon eventually will rival its e-commerce business in sales.

Put in shorthand, Amazon has not nor will it do what business professors recommend: "stick to your own knitting."

Google may be on a path to do some of what Amazon has. Its Android OS is as widely used as any mobile software in the world. But it is not clear, nor has it been well articulated, how the world's largest search company will make money on Android. And its Android's patents could come under withering attack from Apple, which already has battered Samsung in court and means to use the legal system as a competitive weapon. Google also has entered the mobile hardware industry with its buyout of Motorola Mobility. But Motorola products have only a tiny market share in their sector.

Many critics continue to believe that Amazon's Achilles' heel is its low operating margins. Bezos would argue that high operating costs are necessary to move into the many markets he hopes to dominate. Skeptics maintain he has clung to the philosophy for too long. Amazon needs eventually to show how profitable it can be, if that is possible. It is the worry about that profitability that has caused some to believe that Amazon will never yield the sort of return it needs to if it wants to maintain its current valuation, which translates into a market cap of more than $110 billion, which is the highest level in its history.

And history says that Amazon will run out of successes. No company can beat the odds when it has so many strong competitors for most of its businesses. Amazon cannot win across the board of its initiatives because almost no similarly ambitious companies ever have.