Amazon The Largest Player In Cloud Business

Overview

Amazon Inc. (AMZN) has released its first quarter earnings for 2015 after the bell on Thursday. The company reported an loss for the quarter, which wasn't a shocker at all. Wall Street expected an loss but Wall Street didn't expect the company sales gains that top analyst forecast. The big new for investors and the street was that Amazon's cloud computing service had net sales of $1.6 billion. That reporting the firm's first quarter earnings, Amazon stock was up in after-hour trading.

Key Metrics

During the first quarter Amazon operating cash flow increased 47% to $7.84 billion compared to last year's $5.35 billion for the first quarter. Free cash flow increased to $3.16 billion compared to the previous first quarter of $1.49 billion. The company's net sales increased 15% to $22.72 billion compared to the previous first quarter of $19.74 billion. Operating income increased 74% to $255 million compared to $144 million in first quarter of last year. Amazon reported an net loss of $57 million or $0.12 per share, compared to an net income of $108 million, or $0.23 per share in last years first quarter.

Amazon Web Service (AWS)

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The company's Amazon Web Service is the largest cloud computing infrastructure player in the market today. Amazon reported the its Amazon Web Service was now a $5 billion business and still growing. The company's web service business had sales of $1.5 billion and a $255 million profit for the quarter. Amazon Web Service is on track to do $1 billion in annual profits.

Jeff Benzo's said . “Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence. We manage by two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term. We are so grateful to our AWS customers and remain dedicated to inventing on their behalf.”

Highlights From Amazon's First Quarter Report

• Amazon launched Dash Button — a small button that Prime customers can place in their home and use to reorder frequently used household items. Today, customers can chose from 18 popular brands, such as Bounty, Huggies, and Clorox.
• Amazon announced the Dash Replenishment Service (DRS), a new service that enables connected devices to order goods fromAmazon when supplies are running low — like a coffee maker that automatically orders more coffee beans. By using DRS, device makers are able to leverage Amazon’s authentication and payment systems, customer service, and fulfillment network. Early adopters of DRS include Whirlpool, Quirky, Brother, and Brita.
• Amazon announced new features for Amazon Fire TV and Fire TV Stick, including X-Ray (now available directly on your HDTV), support for a captive portal to connect to Wi-Fi at a hotel or dorm room, and new shortcuts. Amazon Fire TV also added expandable USB storage and private listening with support for Bluetooth headphones.
• In just one year, Amazon Fire TV apps and games selection is up 5x, including Sling TV,Fox Sports Go, Flappy Birds Family, TED,WSJ Live, Crossy Road, and Game of Thrones - A Telltale Game Series.
• Fire TV Stick launched in the U.K. and Germany, joining Amazon Fire TV. Pre-orders for Fire TV Stick on Amazon.co.uk and Amazon.de broke all previous records for Amazon devices in the first week of availability.
• Amazon Echo continues to get smarter as more customers use it and provide feedback — new features include Pandora integration, home automation, support for sports scores and schedules, traffic reports and route suggestions, and voice control for customers if listening to music via Bluetooth. Amazon has released a limited preview of the Alexa SDK to enable developers, content creators, and service providers to build apps and experiences for Echo.
• Amazon launched unlimited cloud storage with Amazon Cloud Drive — two new storage plans for customers to securely store new and existing content collections. The Unlimited Everything Plan provides unlimited storage for photos, videos, movies, music, and files, and the Unlimited Photos Plan provides unlimited photo storage plus 5 GB of additional storage for videos, documents, or other files — all for a low annual fee. Customers can sign up for a free 3-month trial on either plan.
• Prime Now has expanded to Miami, Baltimore, Dallas, Atlanta, and Austin. Prime members can choose from tens of thousands of daily essentials through a mobile app. With Prime Now, two-hour delivery is free and one-hour delivery is available for $7.99.
• Amazon Prime celebrated its 10-year anniversary with tens of millions of Prime members around the world. Prime members in the U.S. enjoy unlimited Free Two-Day Shipping on more than 20 million items, unlimited streaming of tens of thousands of movies and TV episodes with Prime Instant Video, more than one million songs and hundreds of playlists with Prime Music, unlimited photo storage with Prime Photos, and access to more than 800,000 books to borrow with the Kindle Owners’ Lending Library.
• Amazon Studios announced that full seasons of Mad Dogs, The Man in the High Castle,The New Yorker Presents, and children’s shows Just Add Magic and The Stinky & Dirty Show will debut exclusively for Prime members in the U.S., U.K., and Germany. Amazon Studios also greenlit second seasons of Mozart in the Jungle and Bosch, as well as original kids series Tumble Leaf,Creative Galaxy, Annedroids, and Gortimer Gibbon’s Life on Normal Street.
• Amazon introduced Amazon@Purdue, our first staffed on-campus pickup and drop-off location at Purdue University. Amazon Student and Amazon Prime members get Free One-Day Shipping on textbooks and Free One-Day Pickup on over one million items when shipped to the Amazon@Purdue location.
• Amazon officially launched Write On by Kindle, an online community where writers and readers share in the creative process. Readers can check out works-in-progress — from short stories to novels — and offer feedback, or they can try their hand at writing a story themselves.
• Amazon launched Amazon Home Services, a new marketplace for on-demand professional services, backed by Amazon’s Happiness Guarantee. Customers can browse, purchase, and schedule hundreds of professional services directly on Amazon.comin less than 60 seconds. Amazon Home Services features handpicked pros offering upfront pricing on pre-packaged services with helpful reviews from customers that have made verified purchase
• Poppy J. Anderson became the first German author to sell over one million Kindle books using Kindle Direct Publishing (KDP), joining the Kindle Million Club with many other internationally successful KDP authors such as John Locke, J.A. Konrath, and Tina Folsom.
• Amazon expanded public fulfillment center tours to the U.K., Germany, France, and Poland. Visit www.amazon.com/fctours for information on available tour locations, dates, and times.
• Amazon Prime members in Spain now receive Free One-Day Shipping with their Prime subscription.
• Amazon Fashion, which has emerged as a top category on Amazon.in, partnered with the Fashion Design Council of India as the official title sponsor of the 25th edition of India Fashion Week.
• Amazon.in launched the Amazon Seller App, a best-in-class mobile app for sellers in India, which makes it easy and convenient for sellers to update inventory, source and list new items on Amazon.in, and respond faster to customer queries.
• Amazon.in launched Kirana Now, a pilot service that delivers everyday essentials to customers within two to four hours. This local service utilizes India’s vast network of small and medium businesses to achieve quick, easy, and convenient delivery for Amazon.in customers.
• Amazon China opened an Amazon international brand flagship store on Tmall, which features thousands of Amazon China’s popular, directly imported products. Additionally, Amazon Global Store selection on Amazon.cn has grown to over one million items.
• AWS announced Amazon Machine Learning, a fully managed service that makes it easy for any developer to use historical data to build predictive models that can be used for a broad array of purposes, including detecting problematic transactions, preventing customer churn, and improving customer support. Amazon Machine Learning is based on the same proven, highly scalable machine learning technology used by developers across Amazon to generate more than 50 billion predictions a week.
• AWS announced AWS Marketplace for Desktop Apps, a new category on the AWS Marketplace that makes it easy for customers to search for and buy applications for their Amazon WorkSpaces cloud-based desktops. Customers can choose from a broad selection of more than 100 applications in eleven categories, and pay by the month for the applications they use. To simplify deployment of these desktop applications, AWS also announced Amazon WorkSpaces Application Manager (Amazon WAM), a new service that packages and delivers applications to Amazon WorkSpaces.
• AWS announced the general availability of AWS Lambda, a compute service that runs developers’ code in response to events and automatically manages the required compute resources, making it easy to build and manage applications that respond quickly to new information. AWS also launched several new features to make it easy for mobile developers to use Lambda for mobile, tablet, and Internet of Things applications.
• AWS announced the general availability of the Amazon EC2 Container Service, a high-performance container management service that makes it easy to run distributed applications using Docker containers on AWS. AWS also added the ability to use Elastic Block Store (“EBS”) and Elastic Load Balancing (“ELB”) with the EC2 Container Service, as well as a new, flexible container scheduler that combine to make the EC2 Container Service the best place to run containers in production.
• AWS introduced the latest generation of Amazon EC2 Dense-storage (D2) instances, and larger, faster Amazon Elastic Block Storage (Amazon EBS) volumes. To support very large transactional databases and big data analytics, the new Amazon EC2 D2 instances offer up to 48 TB of storage and up to 3,500 MB per second of disk read throughput, while the new Amazon EBS volumes store up to 16 TB and process up to 20,000 input/output operations per second (IOPS).

Richard Electronics: A Graham & Schloss Play

Richard Electronics (RELL)

Price: $8.70/share

Market Cap: $119 million

NCAV: $166.3 million

Mkt Cap/NCAV: 0.71

Cash: $97.2 million

S/T Investment: $33.3 million

NCAV: $13.97

Tangible Book Value Per Share: $11.64

Earning Power Value: $15.34

Cash and Short-Term Investment Per Share: $9.30

Overview

Richard Electronics (RELL) is a classic Benjamin Graham and Walter Schloss play. The firms has a clean balance sheet with the bulk of its assets being made of of cash and short-term investments Richard Electronics has little to no debt and a tangible book value of $11.64. The company has a long track record and has been in business for over 60 years. With $97 million in cash and $33 million in short term investment and little debt you can't go wrong. The company is sell for 0.6x its NCAV. Currently the market is valuing the company for less then its cash and short term investment on its balance sheet.

Business Overview

The company is in the business of providing engineered solutions, power grid, microwave tubes and related components, and customized display solutions. Through the company's core engineering and manufacturing capabilities to provided specialized technical expertise and valued added engineering solutions.

Products The Company Provides

• Capacitors
• Electromechancial
• Electron Tubes & Vacuum Devices
• Electro - Optics
• Laser Consumables and Parts
• Inductors
• Microwave Power Sources
• Magnetrons
• Microwave Measurement Devices
• Waveguide Components
• Passive Devices
• CRTs
• LCDs
• Power Amplifers

Application Products Are Used In

• Broadcast Transmissions
• Dielectric Heating
• High Energy Transfer
• High Voltage Switching
• Induction Heating
• Laser Cutting
• Medical Imaging
• Microwave
• Microwave Processing/Heating
• Plasma
• Power Conversion
• Radar
• Radiation Oncology
• Rectification
• RF Amplification
• RF Oscillaction

Financials

For the nine months ending in February 2015, the company had revenues decrease 1% to $102 million and had net loss before extraordinary items totaled $3.4 million v.s. income of $2.5 million. Revenues from the industrial power group (EDG) segment decreased 65% to $22 million and revenues from the display system group (CANVYS) segment decreased 78% to $5.0 million.

Third Quarter of 2015

For the third quarter ending in February 2015, the company reported net sales of $33.5 million, a 1.8% increased from the previous years of $32.9 million. Sales for the company's EDG and Richardson Healthcare businesses increased 4.2% and 3.5% respectfully. But the company's sales for its Canvys division were down 7.4%, compared to the prior year's quarter. For the third quarter gross margin increased to $9.8 million and operating expenses were $12.6 million. By the end of the third quarter the company had cash and investments of $113 million.

Cash and Share Repurchased

Richard announced a third quarter dividend of $0.06 a share and a dividend of $0.054 dividend for holders of class B common stock. The dividend will be payable on May 22, 2015, to all common stockholders of record on May 7, 2015. During the third quarter the company $1 million of its cash to repurchased 134,300 of shares. Since the company announced its repurchase of share plan in 2011, they have repurchase over 4 million shares. Richards Electronics had make it clear that they will continue to repurchase shares.

Valuation

Richard Electronic has an current and quick ratios of 8.22 and 6.37 which shows that the company has an strong balance sheet with its assets outnumbering its liabilities. The company balance sheet is clean and the bulk of its assets are made up of mainly cash and investments. Richard is selling for 0.7x its tangible book value and 0.6x its NCAV value. The market is currently valuing the firm for less then its cash and investments on its balance sheet. Richard Electronic has $9.30 per share cash and investments and sells for $8.70 per share. Right now you can buy a stake Richard and its get non-cash assets for free around with 0.60 cents per share in cash and investments. The company may be reporting short-term losses but has an earning power value of $15.34 per share.

LeapFrog: Now A Classic Net Net Stock

As I went through Gurufocus 52 week lows list LeapFrog popped up on the list. The company is selling below book value and net current asset. LeapFrog is currently a classic Benjamin Graham net net play. The market is currently value LeapFrog for less then cash and net working capital. Mr. Market have given us value investors an rare net net opportunity with an margin of safety of 30%.

Company Overview

 LeapFrog Enterprises (LF) is a educational entertainment company that designs, develops, and markets technology-based learning products for children. The company has a strong well recognized brand power,as well as strong commercial and sales distribution relationships. LeapFrog has created several well-regarded products that parents trust to educate their children with. Despite LeapFrog's strong brand name the firm stock fell 41% during 2014 and had light demand for its educational products. The company goes through cycles where its is quite profitable and other years like 2014 where its makes no money. LeapFrog lost the bulk of its market value last year, and the market is currently valuing the company at less then its cash and net working capital. Since the company earnings, revenues,and sells go through a cycle so does the markets value of the firm. This creates an opportunity for rational investors to buy stake in LeapFrog for less then net current asset value.

Business Overview

LeapFrog has been a pioneer in making reading and learning fun with its devices that has been very popular with the market. Until recently with the introduction of cheaper kid friendly versions of the kindle and samsung tablets has taken a toll on the company's sales. In 2011 the company introduced the LeapPad which sold out during the 2011 holiday season and in 2012 introduced an updated version of the LeapPad sold just as well. But now with cheaper kid friendly devices on the market LeapFrop has seen its sales fall and earning fall as a result of stiffer competition.

New Devices

Leapfrog a few months ago entered the fitness tracker market with its LeapBand that sells for $40. The LeapBand encourage kids to move with 50 different movement challenges. LeapFrog through its wearable LeapBand is targeting kids between the ages of four and seven with parents that use Fitbit, Jawbone, UP, and other wearable movement-tracking bands. The company's other big products is the LeapTV, which is the firm biggest play into the gaming console market. Its new LeapTV console that encourages fitness with its motion-based controller. At a $150 price tag makes its console is cheaper than traditional next-generation console. LeapTV games cost about half of its competitors games do. The company is clearly not putting all of its eggs in its new product line and is continuing to update LeapPad and other legacy learning toys.

LeapFrog's Product Portfolio

• LeapTV - A TV video game console that uses motion control.
• LeapBand - A wearable tracking risk band for four through seven year olds.
• LeapReader - A specially designed stylus that reads audoi books aloud and teaches basic writing skills.
• LeapPad - Is a personalized learning tablet designed for childern ages fouth to nine.

Smartphone Apps

​LeapFrog has developed educactional smartphoen applications that includes;

• Scout's ABC Garden App - iPhone, iPod Touch, and iPad application that was released in 2011.
• Creativity Camera - An iPhone and iPod app tha was released in 2011.
• Mr. Pencil: Learn To Write - An iPhone, iPod and iPad app that was released in 2013.

LeapFrogs Licensing and Partnerships

The company licenses its its LeapFrog Learning Friends to third parties and partners with various companies.

• Kiddieland limited produced ride on toys.
• Masterpieces Puzzles produces jgsaw puzzles.
• Learning Horizons produces books and various stationeries.

Various Partnerships

• Sega toys and Benesse produces localized versions of the toys for the Japanese market.
• Macromedia to co-develop the Leapster handheld gaming console.
• Liongate Home Entertainment has produced LeapFrog learning DVDs.

Financials

Over the last 13 years has generated $6 billion of revenues and over $2.6 billion in profits as well. In some years Since going public LeapFrog has spent over $1.3 billion on Sells, General & Overhead. Leapfrog is profitable and generates double digit margins similar to its peers. Leapfrog is very capable of generating a large amount of revenues and gross profits, but its very cyclical since the company has little product diversification. The company operates with lower gross margins then its competitors. Leapfrog spent $1.3 billion over 13 years on advertising and R&D to build its products and brand. Clearly the company is suffering from the lack of diversification and manufacturing scale. This lack of diversification and scale have lower margins then its competitors. For the nine months ending in December 2014, the firm reported revenues of $305 million and a net loss of $142 million. Leapfrog has during the first of half of fiscal year 2015 reported back to back quarterly losses. The company has seen a 43% decline over the prior year in net sales.

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Valuation

LeapFrog is currently selling for less then cash and net working capital. The market has sent the company shares tanking to the point that LeapFrog is now a classic Benjamin Graham play. The company is selling for -4x its earnings and 0.6x its book value. LeapFrog has a net current asset value of $3.5 per share and has a tangible book value of $3.96 per share. The company is selling for 0.65x its net current asset and has a current ratio of 4.0x. LeapFrog is facing stiff competitions from its competitors and has little to no diversification with its products. The company is selling for at least a 30% discount to NCAV giving any rational investor a margin of safety of at least 30%. With a 30% margin of safety with little to no risk of losing your capital since the company is selling below liquidation value. If the company liquidated shareholders would receive at least $3.00 a share at its current price is at least a 25% return on your investment. Market has created great opportunity to buy a NCAV with a 30% margin of safety since the LeapFrog should sell for atleast NCAV per share.

Ventas Inc: $1.75 Billion Deal To Acquire Ardent

Ventas Inc (VTR) has agreed to acquire privately held Ardent Medical Services and Ardent Health Services for $1.75 billion in an all cash transaction. Ardent Medical Services is a provider of health care services and is one of the tenth largest for profit hospital companies in the United States. Ventas Inc. has signed a definitive agreement to acquire all of Ardent Medical's shares from Welsh, Carson, Anderson & Stows and other shareholders. 

CEO Of Ventas Statement on the Acquisition,

Debra Cafaro said, "This transaction builds upon our excellent track record of executing innovative and value-creating opportunities, and solidifies our leadership position in healthcare real estate," He went on to Say, "The addition of Ardent's platform, which includes high-quality assets with significant market share in three key markets, and a highly-regarded hospital management team, creates a strong avenue for growth in the attractive hospital real estate market. The transaction also increases our diversification by property type and operator,"

Overview Of The Acquisition

After the deal closes in the middle of the year, Ventas said that it would separate Ardent Health Services' hospital operations from its own real estate operations. An sell the hospital operations to one or more newly formed entities. The transaction will add 14 high-quality hospitals to its portfolio. The newly added hospitals to Ventas portfolio will enhance the firms normalized funds from operations by eight cents to ten cents per share during the first year after the acquisition. Ardent will be entitled to distribute up to $75 million in excess cash to its shareholders.

REIT Spin-off

The REIT plans to separate Ardent's operating business from its real estate portfolio and sell to a new entity owned my Ardent Management and Ventas will have a 9.9% stake as well. The two feel enter into long-term lease agreement. REIT spin-off will comprise 355 skilled nursing facilities and other health care assets operated by 44 regional or local care provides. The average lease agreement doesn't expire for ten years. It is expected to generate funds from operations of $240 to $245 million in its first year of operations.

Bruce Berkowitz: On Fannie & Freddie

Bruce Berkowitz (Trades, Portfolio) of Fairholme Capital Management talked about Fannie and Freddie with Bloomberg "Surveillance". He made its clear that Fannie and Freddie are private companies. 

Watch Bruce Berkowitz (Trades, Portfolio) interview here: http://www.bloomberg.com/news/videos/b/d1ce6587-13ee-4577-ac99-8bb5c95af798

Warren Buffett: Exclusive Interview

Warren Buffett did a exclusive interview with IconicVoices.org  where he discuss a variety of topics.

TiE SoCal: Fireside Chat With Investment Guru's

TiE SoCal had a fireside chat with investment gurus which included Mohnish Pabrai (Trades, Portfolio) and three other top investment managers. They discuss investments, the market and other various subjects.