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.

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Will the collapse of the EU/Canada trade deal speed the demise of Jean-Claude Juncker?

The embattled European Comission President has already survived the migrant crisis and Brexit.

Jean-Claude Juncker, the embattled President of the European Commission, is likely to come under renewed pressure to resign later this week now that the Belgian region of Wallonia has likely scuppered the EU’s flagship trade deal with Canada.

The rebellious Walloons on Friday blocked the Comprehensive Economic and Trade Agreement (CETA). The deal for 500 million Europeans was at the final hurdle when it fell, struck down by an administration representing 3.2 million people.

As Canada’s trade minister, Chrystia Freeland, walked out of talks in tears and declared the deal dead, fingers were pointed at Juncker. Under pressure from EU governments, he had agreed that CETA would be a “mixed agreement”. He overruled the executive’s legal advice that finalising the deal was in the Commission’s power.

CETA now had to be ratified by each member state. In the case of Belgium, it means it had to be approved by each of its seven parliaments, giving the Walloons an effective veto.

Wallonia’s charismatic socialist Minister-President Paul Magnette needed a cause celebre to head off gains made by the rival Marxist PTB party. He found it in opposition to an investor protection clause that will allow multinationals to sue governments, just a month after the news that plant closures by the world’s leading heavy machinery maker Caterpillar would cost Wallonia 2,200 jobs.

Juncker was furious. Nobody spoke up when the EU signed a deal with Vietnam, “known the world over for applying all democratic principles”, he sarcastically told reporters.

“But when it comes to signing an agreement with Canada, an accomplished dictatorship as we all know, the whole world wants to say we don’t respect human right or social and economic rights,” he added.  

The Canadian Prime Minister Justin Trudeau was due to arrive in Brussels on Thursday to sign CETA, which is backed by all EU leaders.

European Council President, Donald Tusk, has today spoken to Trudeau and his visit is currently scheduled to go ahead. This morning, the Walloons said they would not be held to ransom by the “EU ultimatum”.

If signed, CETA will remove customs duties, open up markets, and encourage investment, the Commission has said. Losing it will cost jobs and billions in lost trade to Europe’s stagnant economy.

“The credibility of Europe is at stake”, Tusk has warned.

Failure to deliver CETA will be a serious blow to the European Union and call into question the European Commission’s exclusive mandate to strike trade deals on behalf of EU nations.

It will jeopardise a similar trade agreement with the USA, the Transatlantic Trade and Investment Partnership (TTIP). The Commission claims that an “ambitious” TTIP could increase the size of the EU economy by €120 billion (or 0.5% of GDP).

The Commission has already missed its end of year deadline to conclude trade talks with the US. It will now have to continue negotiations with whoever succeeds Obama as US President.

And if the EU cannot, after seven years of painstaking negotiations, get a deal with Canada done, how will it manage if the time comes to strike a similar pact with a "hard Brexit" Britain?

Juncker has faced criticism before.  After the Brexit referendum, the Czechs and the Poles wanted him gone. Hungary’s Prime Minister Viktor Orban muttered darkly about “personnel issues” at the Commission.

In July, it was reported that Angela Merkel, the most powerful politician in Europe, was plotting to oust Juncker. Merkel stayed her hand, and with German elections looming next year is unlikely to pull the trigger now.

When he took office in November 2014, Juncker promised that his administration would be a “political Commission”. But there has never been any sign he would be willing to bear the political consequences of his failures.

Asked if Juncker would quit after Brexit, the Commission’s chief spokesman said, “the answer has two letters and the first one is ‘N’”.

Just days into his administration, Juncker was embroiled in the LuxLeaks scandal. When he was Luxembourg’s prime minister and finance minister, the country had struck sweetheart tax deals with multinational companies.  

Despite official denials, rumours about his drinking and health continue to swirl around Brussels. They are exacerbated by bizarre behaviour such as kissing Belgium’s Charles Michel on his bald head and greeting Orban with a cheery “Hello dictator”!

On Juncker’s watch, border controls have been reintroduced in the once-sacrosanct Schengen passport-free zone, as the EU struggles to handle the migration crisis.

Member states promised to relocate 160,000 refugees in Italy and Greece across the bloc by September 2017. One year on, just 6,651 asylum seekers have been re-homed.

All this would be enough to claim the scalp of a normal politician but Juncker remains bulletproof.

The European Commission President can, in theory, only be forced out by the European Parliament, as happened to Jacques Santer in 1999.

The European Parliament President is Martin Schulz, a German socialist. His term is up for renewal next year and Juncker, a centre-right politician, has already endorsed its renewal in a joint interview.

There is little chance that Juncker will be replaced with a leader more sympathetic to the British before the Brexit negotiations begin next year.

James Crisp is the news editor at EurActiv, an online EU news service.