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BUSINESS INSIDER

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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Economy

Lex Tusk? How Poland’s Controversial "Russian Influence" Law Will Subvert Democracy

The new “lex Tusk” includes language about companies and their management. But is this likely to be a fair investigation into breaking sanctions on Russia, or a political witch-hunt in the business sphere?

Photo of President of the Republic of Poland Andrzej Duda

Polish President Andrzej Duda

Piotr Miaczynski, Leszek Kostrzewski

-Analysis-

WARSAW — Poland’s new Commission for investigating Russian influence, which President Andrzej Duda signed into law on Monday, will be able to summon representatives of any company for inquiry. It has sparked a major controversy in Polish politics, as political opponents of the government warn that the Commission has been given near absolute power to investigate and punish any citizen, business or organization.

And opposition politicians are expected to be high on the list of would-be suspects, starting with Donald Tusk, who is challenging the ruling PiS government to return to the presidency next fall. For that reason, it has been sardonically dubbed: Lex Tusk.

University of Warsaw law professor Michal Romanowski notes that the interests of any firm can be considered favorable to Russia. “These are instruments which the likes of Putin and Orban would not be ashamed of," Romanowski said.

The law on the Commission for examining Russian influences has "atomic" prerogatives sewn into it. Nine members of the Commission with the rank of secretary of state will be able to summon virtually anyone, with the powers of severe punishment.

Under the new law, these Commissioners will become arbiters of nearly absolute power, and will be able to use the resources of nearly any organ of the state, including the secret services, in order to demand access to every available document. They will be able to prosecute people for acts which were not prohibited at the time they were committed.

Their prerogatives are broader than that of the President or the Prime Minister, wider than those of any court. And there is virtually no oversight over their actions.

Nobody can feel safe. This includes companies, their management, lawyers, journalists, and trade unionists.

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