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Eric Bleeker: Let's look at reasons to sell Amazon as well. We've got bull reasons, but there is no more polarizing tech company than Amazon. What are your thoughts on that?
Austin Smith: Some reasons to sell Amazon; the obvious one is the multiple. Although we can justify the premium multiple, you back out cap ex, it is still scary expensive for what you're getting. You have to have a lot of faith that this is a company that at some point is going to stop their big capital expenditures and they're going to actually return some of that money to shareholders.
When you're buying this company you're basically buying hopes and dreams for the long run, and the multiple is evidence of that. While we like companies to invest for the future, as investors, at some point you want some of that money to come home.
Eric: It's rare to see $117 billion company with no P/E.
Austin: Exactly. We like the investments for the future, but if you're buying an ownership stake in the company, at some point you want those investments in the future to come back to you in the form of earnings and Amazon has, up until this point, never demonstrated their willingness to do that.
You have to have a faith that it's going to be around the next bend for you, as a shareholder, otherwise you could just be sitting on the sidelines for 30 years, as this company keeps investing for tomorrow.
Other reasons to sell...
Eric: Here's what I would say, too. Something like a Facebook, you have a technology like social networking; it flows freely across the world and you look at how quickly it can move. There are no frictions to growth within that except for language, which is an easy-to-overcome friction.
Then you go with something like Amazon; you want to move into a new country? They don't have a Latin American presence right now. You've got to build out your entire infrastructure.
You look at all these other companies in technology, that you see these massive growth rates, and you say, "Why not Amazon?" You know why not Amazon? Because they can't get into these markets.
The truly global economy is difficult, and they really operate in, I believe, seven countries. Also, you look at something like a Kindle Fire competing against Apple... Apple is in over 100 countries with iTunes. Amazon's really only in the seven countries where they operate their physical retail presence. It's a very hidden anchor on their ability to grow with other tech titans.
Austin: Yeah. Evidence to that point is the difficulty that big retailers have faced in emerging economies like India.
India's infrastructure is notoriously behind the times. The blackout last year that put 600 million people without electricity is just evidence of this. Wal-Mart's had a difficult time in India. Wal-Mart's even had a tough time in China, which in many ways has more advanced infrastructure and roads than India. You're talking about very real difficulties here.
It's hard to have a really meaningful online experience if you can't ship things to customers in the speedy fashion that you've hung your hat on. Just having a competent distribution network -- having those roads, having good, reliable infrastructure -- is so crucial to Amazon's expansion in these economies, and infrastructure builds take five, 10, 20, 30 years.
Eric: Still five% market share in China.
Austin: Exactly. You highlight a very real friction to Amazon's expansion, as a retailer at least, into these other markets.