I don't really have a bone in the fight, but to answer your question. In the world today, the company is governed by the extant investors (not the ones that give them money to start up or IPO). So the sentiments of those investors basically determine how the management gets compensated (how high the performance bars are, etc). In a normal world, the investors would tend to default to management provided that management is generating "returns on investment" in relation to the Capital at risk in the organization. For a compnay that is 15 years old+, its pretty odd to see a continual state of "strategic" losses. I don't think anyone is arguing that Amazon is stupid (investors or managment). The legitimate question is more like...what is everyon missing here?
I see your logic, but calling it "paid for by investors" is not accurate. Maybe "not run with aggressive short-term behaviour like some shareholders would like".
This is a semantic distinction, between cost and opportunity cost. And the sentence is really just your imagination. The market is driven by quite sophisticated investors these days. You have to remember that hedge funds (as one example) are not mutual funds. They are in all kinds of illiquid complex stuff. There is plenty of depth for strategy that makes sense, and has longer term payouts. Again, the issue is more that Nobody appears to actually understand what that is. Or at least, nobody is talking about it. Wondering what that really is, again, is not short term thinking. Its more like sanity checking. That's why its worth playing devils advocate, occasionally. I'm actually sort of more curious to understand it myself after having looked at it a bit more today.
News flash: most technology companies don't really pay dividends. Probably, the main reason is because dividends are taxed at a pretty high rate. It's easier just to keep the money overseas in some tax shelter or other (Apple, Google), or plow it back into the company as investment (Amazon). Microsoft is one of the few tech companies that pays dividends.
Spending money on dividends looks like a poor choice. If your share price is sagging, you can always buy back your own shares with part of your cash hoard, like Microsoft did recently. Investors are always willing to believe that your investment will make the stock more valuable because TECHNOLOGY. And if they aren't, who is to guarantee that the stock will have any value at all next year? Cough-- Nortel Networks-- cough.
While its true that lack of profits limit dividends, return on invested capital is measured using other metrics. So the question of dividends "not a news flash", in the sense that it's not central to the topic.
The question of profits, though remains. Three possibilities:
(1) Tax losses & Tax Shields (avoidable, but cash positive)
(2) Obfuscation of earnings (avoidable, but to deter entry)
(3) Stategic operating losses (unavoidable)
_____________
(4) Incompetence (or actual lack of business leverage).
Since no one is really arguing (4) the question is more which of 1-3 is relevant? I don't think avoiding dividends would be a central consideration, but YMMV.
