Tale of two companies: Apple's profit and Amazon's loss

Apple made $8bn profit last quarter, while Amazon lost $28m. Yet the two companies are treated as equally successful. Why?

Two giants of the technology world posted their quarterly results yesterday evening, with the differences highlighting the gulf between them – both in finances, and perceptions.

Apple's earnings report for the fourth quarter 2012 showed an $8.2bn profit on $36bn in revenue. This is a new Q4 record for the company, topping this quarter last year when it earned $6.62bn profit on $28.27bn revenue. The gains were largely due to an increase in stock shipped: iPad sales went from 11m to 14m, and iPhone sales from 17m to 26.9m, both year-on-year (the figures don't include the iPhone 5 to any significant degree, which was only on sale for the last nine days of the quarter). The rest of Apple's business held largely flat, with the exception of the iPod line which continued losing share to smartphones. The average gross margin, in particular, was essentially unchanged at 40 per cent.

At the other end of the West Coast, in Seattle, Amazon announced its results. Net sales were up 27 per cent year-on-year, at $13.81bn – but operating income fell to a loss of $28m, down from the $79m profit it made last year. That loss wasn't unexpected – the company had been warning that it expected a loss of between $50m and $350m – but it reaffirms the image of Amazon as a company unconcerned with profit.

Much of the money has been spent on heavy investment, and the Verge writes that Amazon Web Services and Kiva Systems have been particular beneficiaries of the spending. The former is the spin-off from the company's core business, and provides web services – hence the name – to a number of other companies, ranging from garage start-ups to behemoths like Reddit. That business suffered a blow earlier this week when it experienced a sustained outage, which underscores the need for further investment.

Kiva Systems is Amazon's recently-acquired robotic warehouse-management system. Depending on how cool you find robots in warehouses, it does pretty cool stuff for Amazon's productivity, but has yet to be put into widespread usage.

Despite the fact that these results are as different as night and day, reaction to both was muted. Apple failed to meet the guesses made by Wall Street, which had forecast even higher sales particularly of iPads. The Q3 results were artificially depressed by the lack of availability of the then-new first generation retina iPad, and some were expecting a bigger bounce back from that than there actually was.

There was also disappointment in financial sectors about Amazon's performance. This is the second quarter running in which the company has posted a loss, despite sales in the tens of billions, and many investors are starting to wonder if the company really is preparing for profit, or if this is the way Amazon will always be run.

I wrote last week about the ways Amazon could be planning to get into profit, and they all boil down to dominating a market. Either the company's expansion into same-day delivery allows it to conclusively deal the killing blow to traditional retail; or it's domination of book selling allows it to bully publishers into handing over ever greater shares of the margin; or its new Kindles allow it to move low-margin sales of physical media over to high-margin sales of digital media.

At the time, I worried about the pitfalls that lay in the way of each of those aims, but it looks like there might be a new one: if Amazon's investors see many more quarters like these last two, they may not stick around for the promised light at the end of the tunnel.

The Grand Central Apple Store, a recent opening by the company. Photograph: Apple

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images/Richard Stonehouse
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Here's how Jeremy Corbyn can win back the Midlands

The Midlands is where elections are decided - and where Jeremy Corbyn can win. 

The Midlands: this “formless” place is where much of Labour’s fate lies. The party witnessed some of its most disappointing 2015 results here. In those early, depressing hours of 8 May, Nuneaton was the result that rang the death knell of Labour’s election chances. Burton, Cannock Chase, Halesowen & Rowley Regis, Redditch and Telford weren’t far behind. To win here Labour need to build a grassroots movement that engages swing voters.

Luckily, this is also a place with which Labour’s new leader has a natural affinity. The bellwether seat of Nuneaton is where Jeremy Corbyn chose to hold his last regional rally of the leadership contest; just a couple of counties over you’ll find the home Corbyn moved to in Shropshire when he was seven. He cut his political teeth round the corner in marginal constituency The Wrekin; it was in this key seat he did his first stint of campaigning. Flanked by a deputy leader, Tom Watson, who represents Labour stronghold West Bromwich East, Corbyn has his eye on the Midlands.

As MP for Islington North since 1983, Labour’s leader has earned London-centric credentials that have long since overshadowed his upbringing. But Corbynism isn’t a phenomenon confined to the capital. The enthusiasm that spilled out of Corbyn’s summer leadership rallies across the country has continued into the autumn months; Labour’s membership is now over 370,000. It’s fast catching up with 1997 figures, which are the highest in the party’s recent history.

London is the biggest beneficiary of this new movement - with 20 per cent of Labour’s members and 19 per cent of new members who signed up the week before conference coming from the capital. But Corbynism is flourishing elsewhere. 11 per cent of all Labour party members now reside in the southeast. In that same pre-conference week 14 per cent of new members came from this mostly Tory blue area of the country. And since last year, membership in the southwest increased by 124 per cent. Not all, but a good deal of this, is down to Corbyn’s brand of anti-austerity politics.

A dramatic rise in membership, with a decent regional spread, is nothing to be sneered at; people are what you need to create an election-winning grassroots movement. But, as May proved, having more members than your opposition doesn’t guarantee victory. Corbyn has spoken to many who’d lost faith in the political system but more people need to be won over to his cause.  

This is clear in the Midlands, where the party’s challenges are big. Labour’s membership is swelling here too, but to a lesser degree than elsewhere. 32 per cent of party members now and 13 per cent of those who joined up in seven days preceding conference hail from this part of the country.

But not all potential Labour voters will become card-carrying members. Corbyn needs to speak to swing voters. These people have no party colours and over the summer they had mixed views on Corbynism. In Nuneaton, Newsnight found a former Labour turned Ukip voter who thought Corbyn would take Labour “backwards” and put the economy at risk. But a fellow Ukip voter said he saw Corbyn as “fresh blood”.

These are enduring splits countrywide. Voters in key London marginal Croydon Central gave a mixed verdict on Corbyn’s conference speech. They thought he was genuine but were worried about his economic credibility. While they have significant doubts, swing voters are still figuring out who Labour’s new leader is.

This is where the grassroots movement comes into play. Part of the challenge is to get out there and explain to these people exactly who the party is, what it’s going to offer them and how it’s going to empower them to make change. 

Labour have nascent plans to make this reality in the Midlands. Tom Watson advocated bringing back to life this former industrial heartland by making it a base for manufacturing once again – hopefully based on modern skills and technologies.  He’s also said the leadership team will make regular regional visits to key seats. Watson’s words chime with plans floated by shadow minister Jon Trickett: to engage people with citizens’ assemblies where they have a say over Labour politics.

But meetings alone don’t make grassroots movements. Alongside the economy, regional identity is a decisive issue in this – and other – area(s) of the country. With the influx in money brought in by new members, Labour should harness peoples’ desire for belonging, get into communities and fill the gaps the Government are leaving empty. While they’re doing this, they could spread the word of a proper plan for devolution, harking back to the days of municipal socialism, so people know they’ll have power over their own communities under Labour.

This has to start now, and there’s no reason why the Midlands can’t act as a model. Labour can engage with swing voters by getting down to a community level and start showing – and not just saying –  how the party can make a difference. 

Maya Goodfellow is a freelance journalist.