News headlines last week broadcast Apple’s financial turnaround (by barely beating Wall Street’s already low expectations), Google’s massive profits and massive waste of money on Moonshot expenses, and Amazon making a massive profit.
Let’s deal with Amazon first. The company made almost a billion dollars in profit; the most effort? How? It stopped spending so much on wasted projects that have not made money. Ipso facto and alakazam, massive profit. Apple and Google? They’re both flushing money away.
Public Bets, Private Bets
Apple remains the most diversified of the two tech giants with a growing line of highly profitable products; iPhone, Mac, iPad, Watch, Stores, Services et al, while Google makes money the old fashioned way; selling advertising.
Yet, Apple spends many billions on R&D (research and development) conducted mostly in private. What does all that money do for Apple? Only Apple knows because the company’s product line hasn’t expanded much in recent years and the company has fallen behind features and quality of many hardware competitors. Without much accountability for all those R&D dollars, one could argue that Apple is flushing the money away on frivolous investments that haven’t return much of an investment.
The same can be said of Google. The parent company name, Alphabet, is an interesting term; a bet on the future of new products. Indeed, Google (Alphabet) has all kinds of heavy monetary and resource bets on a growing list of products and projects, from high speed internet fiber installations to self-driving cars to Nest and more. The end result? Google is spending billions each year on products and projects that never see the light of day, and those that go public lose money hand over fist. Google remains a one-trick advertising pony even after spending tens of billions of dollars on Moonshot projects, investments, acquisitions, and everything else rich companies do to stay rich.
The crowd of technology companies I follow– Apple, Google, Microsoft, Amazon, Samsung and a few others– have one thing in common. They’re all rich. With the exception of Apple, and to a much lesser extent, Microsoft, all have struggled to replicate their success with other products or services that match what made them rich in the first place.
Apple might be a closed product ecosystem but it works well to generate massive revenue and profits that are the envy of the technology industry, but every quarter billions of dollars are spent on product research that gets wasted; the product line doesn’t grow very fast or go very far.
After a few decades of diversification attempts and tens of billions in wasted money, Microsoft has gotten better at reinventing itself. It has a long way to go, but it’s going in the right direction.
Samsung is something of a conglomerate with a diverse array of products that range from chips to displays to TVs to CPUs to refrigerators and washing machines to copiers to smartphones and tablets. They all play a part in growing the company’s revenue and profits and Samsung isn’t afraid to bet big on the future (copying Apple’s iconic iPhone to the atomic level, for example).
Amazon is something of an outlier in the group, hasn’t made much money until recently, but remains much of what it always has– an online retailer. Sure, Amazon’s web services are huge, but they don’t make huge money. The profits arrived when Amazon stopped crazy-assed spending.
Google (Alphabet) is rich, yes, but has yet to translate those riches into similar riches with new products. Flushing money away, indeed.