Analysts publicly write to Amazon CEO: Pursuing too many creative ideas, investing a lot of money but not achieving results

On Wednesday, June 8th, analysts at Bernstein Research wrote a public letter to Amazon's CEO and board, stating that Amazon is pursuing "too many ideas" and needs to focus on the best opportunities.In an open letter to Amazon CEO Andy Jassy and the board, Bernstein analyst Mark Shmulik stated that Amazon has become too fragmented in its pursuit of disrupting everything from healthcare, grocery stores, to internet satellite services, and missed out on the opportunities hidden in its core business

On Wednesday, June 8th, analysts at Bernstein Research wrote a public letter to Amazon's CEO and board, stating that Amazon is pursuing "too many ideas" and needs to focus on the best opportunities.

In an open letter to Amazon CEO Andy Jassy and the board, Bernstein analyst Mark Shmulik stated that Amazon has become too fragmented in its pursuit of disrupting everything from healthcare, grocery stores, to internet satellite services, and missed out on the opportunities hidden in its core business.

With AWS, Amazon still dominates in the fields of e-commerce and cloud computing. However, analysts say that in many other areas, the company has also invested a large amount of funds, but has not seen results.

Schmick's rating of Amazon stock is' outperforming the market ', He wrote in an open letter, "We fully support Amazon's efforts to discover and seize the next AWS scale opportunity. However, what we have seen recently is that this company is pursuing too many ideas, and those not so good ideas have taken away resources, capital, and most importantly, people's attention to truly disruptive innovation that 'only Amazon can do'

Schmick stated that Amazon's stock performance has also disappointed investors compared to its "closest tech giants (Apple, Microsoft, and Google)". So far this year, Amazon's stock price has risen by 50%, but in the past five years, its performance has been about 52% lower than other technology giants.

Schmuck urged Amazon to return to the mindset of "the first day of entrepreneurship", referring to a phrase advocated by Jeff Bezos, the founder and executive chairman of Amazon. Bezos once said that the mindset of starting a business on the first day will help Amazon avoid decline and encourage it to continue to innovate quickly like a startup, no matter how large the company becomes.

In his 2017 annual shareholder letter, Bezos stated, "The mindset of starting a business on the second day is to stagnate and then become insignificant. Following that is a painful decline, and finally death. That's why it's always important to maintain the mindset of starting a business on the first day

Schmick wrote that Amazon should divest itself of healthcare and the newly established Low Earth Orbit Satellite Project Kuiper, or seek external financing or reduce expenses. He pointed out that Amazon has been entering the healthcare field for many years, and later abandoned remote healthcare services such as Care, Health and Fitness Bracelet Halo, and a healthcare joint venture called Haven.

According to Schmuck, "the Kuiper project seems more extreme as an investment field," and Amazon has promised to invest $10 billion to expand the plan. He wrote that Google has not achieved success in ProjectLoon, Fiber, and Fi projects, indicating that "no matter how cool the technology is, capital intensive, low profit utilities are not worth investing in

Schmick said that Amazon should even follow the example of Google's parent company Alphabet by integrating the "Kuiper project", healthcare project, and possibly intelligent voice assistant Alexa into "other bets". This approach can showcase a "healthier and more profitable core business" without compromising the company's efforts to "build the next AWS".

Schmuck is also skeptical about Amazon's expansion in still fiercely competitive international markets such as Brazil, Singapore, and India. He referred to this as "spending money after money unjustly", although these markets may have strategic value.

Schmuck wrote that Amazon needs to "investigate in advance" when considering the launch of physical businesses such as Whole Foods Market, Fresh and Go. The company purchased Whole Foods Market with 13.7 billion dollars in 2017, and continued to launch groceries on its website, as well as other pilot stores. Recently, the company has suspended further expansion of Fresh and Go stores due to Jesse's desire to cut costs.

In Schmuck's view, Amazon should not continue to "repair" its Fresh and Go store businesses, but should "purchase a proven concept, such as a potential, stripped KR/ACI store". He refers to the stores Kroger and Albertsons are selling as part of their integration plan.

Schmick said that Amazon should focus on its core strengths and continue to advance into other areas that have already gained traction, encouraging its advertising and media departments to continue expanding, as well as expanding the Buywith Prime service, which allows websites outside of Amazon to leverage its Prime delivery advantages.

Schmuck added that the current aimless and scattered strategy of diversification has left shareholders confused and needs to be corrected to curb the continued underperformance. He pointed out that Amazon's position in the artificial intelligence competition is still uncertain.

The investor questions we received today were, 'Is AWS ranked bottom in the artificial intelligence field?', 'Is retail really a profitable business?', and even 'Do we want Jesse to participate in the financial report conference call?' "Schmuck wrote. These all point to a fundamental problem: Amazon does not have its own narrative

A spokesperson for Amazon did not comment on this article, but pointed out the shareholder letter written by Jesse in April, which mentioned some issues related to the Bernstein report. Jiaxi stated in the letter that Amazon has spent several months analyzing its business and determining "whether we believe every plan has long-term potential" to boost revenue and operating profits.

When it comes to international expansion, Jia Xi said, "These new markets require a certain amount of fixed investment to start and expand, but we like their current development trajectory

Jassy stated in the letter that Amazon needs a "wider physical store footprint" to provide services to more people in the grocery market. For the 'Kuiper Project', this is' a very significant potential opportunity for Amazon 'and was initially capital intensive, similar to AWS. (Small)