Economy

Analyst: Amazon Shares To Rise 13% This Year, But Not Thanks To E-Books

Jeff Bezos' company has its head in the cloud.

All smiles for Amazon founder Jeff Bezos
All smiles for Amazon founder Jeff Bezos
Julie Bort

Amazon is notoriously tight-lipped about how much money it really makes on its cloud business, Amazon Web Services.

But it could be sitting on a unit that will generate nearly $4 billion of high-margin revenues this year, writes Macquarie Capital analyst Ben Schachter in a research note issued last week.

He believes that AWS will bring in $3.8 billion in revenue in 2013 and would be valued at a $19 billion company if were a stand-alone company.

And he, says, that's conservative, based on "our 2013 AWS revenue estimate." If he was aggressive enough to use an 8x multiple, AWS would be worth up to $30 billion, he writes.

Plus, AWS's gross margins are really high, he says because "Amazon runs all AWS costs, including employee/ operational and depreciation, through the Technology & Content expense line."

This meant that AWS contributed 190 points of overall gross margin to Amazon in 2011 and it will contribute more than 500 points by 2015, he says.

It all adds up to Amazon why he thinks Amazon's share price will hit $305 in the next 12 months. Amazon closed above $268 on Thursday.

But others wouldn't buy all of his analysis.

Amazon doesn't break out AWS revenue and margins in its financial reports. It lumps in AWS in its “other” revenue category. And another school of thought believes that Amazon sells its cloud services on razor thin margins, points out GigaOM's Barb Darrow.

We're pretty sure that Amazon is making at least a decent return for its effort with AWS, even if it's not the 500+ points of gross margin that Schachter envisions.

However, we're skeptical that enterprises will rush to Amazon more than other clouds available to them, from Google to Rackspace.

That's because, while Amazon is known for its cutting-edge cloud tech and low costs, it doesn't have a great reputation for reliability, a crucial consideration for an enterprise. All clouds go down at some point, but Amazon's outages are highly visible, such as the one that brought down Netflix on Christmas.

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Ideas

Saving The Planet Is Really A Question Of Dopamine

Our carelessness toward the environment could be due, in part, to the functioning of a very primitive area of our brain: the striatum.

Ad scuba-diver and brain coral

Stefano Lupieri

PARIS — Almost every week, a new scientific study alerts us to the degradation of the environment. And yet, we continue not to change anything fundamental in our systems of production and habits of consumption. Are we all suffering from blindness, or poisoned by denial?

In his popular books Le Bug humain (The Human Bug) and Où est le sens? (Where is the Sense?), Sébastien Bohler, a journalist in neuroscience and psychology, provides a much more rational explanation: The mechanism responsible for our propensity to destroy our natural environment is in fact a small, very deep and very primitive structure of our brain called the striatum.


This regulator of human motivation seems to have been programmed to favor behaviors that ensure the survival of the species.

Addictions to sex and social media

Since the dawn of humanity, gathering information about our environment, feeding ourselves, ensuring the transmission of our genes through sexual intercourse and asserting our social status have all been rewarded with a shot of dopamine, the 'pleasure hormone.'

Nothing has changed since then; except that, in our society of excess, there is no limit to the satisfaction of these needs. This leads to the overconsumption of food and addictions to everything from sex to social media — which together account for much of the world's destructive agricultural and energy practices.

No matter how much we realize that this is leading to our downfall, we can't help but relapse because we are prisoners of the dopamine pump in the striatum, which cannot be switched off.

Transverse section of striatum from a structural MRI image

Lindsay Hanford and Geoff B Hall via Wikipedia

Tweaking genetics 

According to Bohler, the only way out is to encourage the emergence of new values of sobriety, altruism and slowness. If adopted, these more sustainable notions could be recognized by the striatum as new sources of dopamine reward. But there's the challenge of promoting inspiring stories that infuse them with value.

Take the photo-collage exhibition "J'agis ici... et je m'y colle" ("I'm taking action here... and I'm sticking to it"), a collection of life-size portraits of residents committed to the energy transition, displayed on the walls of the French coastal city of La Rochelle.

Backed by the French National Center for Street Arts, photographer Martin Charpentier may be employing artistic techniques, but he's also tinkering with neuroscience in the process.

Les Echos
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