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.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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