, Inc.(NASDAQ:AMZN): Ready To Dominate The Cloud

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October 1, 2013 9:49am NASDAQ:PNQI NASDAQ:QQQ

cloud computing: According to a recent Wall Street Journal article, cloud-based computing is the fastest expanding business at, Inc.(NASDAQ:AMZN). They call it AWS (Amazon Web Services). Amazon doesn’t break out separate numbers for its

AWS but Macquarie estimates revenues at $2.1 billion this year and is expecting an 81% increase year over year. 81%!

And by the end of the decade, Macquarie’s estimates revenues in the $15 to $20 billion range by the end of the decade.

Amazon’s CEO said in the Journal article that AWS is still in its infancy but he expects it to be at least as big as the company’s retail numbers.

That doesn’t mean much until you understand that the retail portion does 20 times as much in revenues as the AWS. 20 times!

That makes even the generous Macquarie estimates look to be off by as much as half.

But the best part of this story is that Amazon is undercutting its cloud competition in the same way it does its retail; razor thin margins.

Google shows a 32% margin and Rack Space 12% while AWS’s margin is 1.8%. And AWS has cut prices 23 times since its roll out and expects more price cuts as the technology evolves.

I’m glad I don’t have to compete with this type of pricing pressure. There is no one who can wage a price war like Amazon. Expect AWS to be a huge producer.

by Steve McDonald, Bond Strategist, The Oxford Club

Investment U provides cutting-edge research and strategic financial recommendations for all levels of investors through its morning publication Investment U Daily and its related publications.

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