amazon/b?node=8037720011&ref_=cm_sw_r_fa_airprimeShare Ive seen lots of posting about this today. This is a great idea and exciting to see it really happening. And then the logistics guy in me wants to see numbers. They say its a much better way to deliver than using trucks, ok, wheres the numbers to back that up? A truck delivers hundreds of packages in a single route, drones deliver one package per trip. Over the course of a year, which is cheaper to operate? Its expensive to pay a driver but how many packages (and drones!) will be lost to theft and hacking? What about bad weather days? It takes a lot more to stop a truck than one of these drones. And those FAA drone regulations that arent in place yet could hold it all up. Sure this could be a supplemental delivery service for prime customers, but how much would a customer have to pay for this delivery service for Amazon to break even on it? ....assuming Amazon will have to turn a profit someday. Which brings up the 800 lb gorilla in the room, once the irrational exuberance over Amazon stock dries up and Amazon has to operate profitably, whats to stop Walmart or anyone else from throwing enough money at this to compete on a level playing field? (In case you missed it, CNNMoney recently called for a 90% drop in Amazon stock price. Thats right, a downward correction of 90% down to about $37 per share. money.cnn/2013/10/29/investing/most-overvalued-stocks/) If I were to start a company with the aim of taking on Google, I would be decades behind on proprietary technology they have. Even Apple had some major glitches building a suitable substitute for Google maps (which isnt even considered a revenue source for Google). But once Amazon spends the time and money (more accurately, the money of investors in its stock) to work out the kinks and prove that drone delivery is economically viable, any other major retailer/distributor can do the same sans the financial pain of pioneering the process. Drones delivering packages in the near future, definitely. But I would not be piling into Amazon stock over this news. (Amazon stock opened sharply higher today but closed down proving that amateurs trade in the first hour of the day and professionals in the last.) Its a great idea but at this early stage I cant help think this is more advertising for Amazon stock than solid business. There are way too many variables not in place yet and this isnt the kind of proprietary, exclusive advantage that warrants jumping into the stock now. Amazon stock may continue to climb, but only on the irrational exuberance of investors. The fundamentals are not there. The market in the short term is very irrational, but over the long term its extremely rational.
Posted on: Tue, 03 Dec 2013 08:00:25 +0000