Amazon.com: Punished by Impatient Investors
After ramping up spending to better compete with Apple (AAPL), Amazon.com (AMZN) reported a 73 percent plunge in third-quarter profit on Oct. 25, to $63 million. Shares closed down 13 percent the next day as investors showed impatience with the company’s strategy of sacrificing profit margins for sales and market share gains. In November, Amazon will begin selling its new Kindle Fire tablet for $199, which is half the price of Apple’s iPad and also less than the device costs to produce. The company aims to generate profits by selling digital music, books, and movies. Amazon’s operations could lose $200 million in the fourth quarter as costs mount, the company said.
Cigna: Banking on Baby Boomers
Cigna (CI), the fifth-largest U.S. insurer, agreed to buy HealthSpring (HS), a health-maintenance organization, for $3.8 billion in cash. The deal will add 1.17 million Medicare customers, tripling the number Cigna currently serves. Three-quarters of seniors are covered directly by Medicare and not by commercial managed-care plans, making private plans the fastest-growing products for health insurers. After this move to target baby boomers, Cigna now is looking for acquisitions that will help direct sales to consumers younger than 65.
Netflix: Lost Subscribers, Plunging Stock
Netflix’s (NFLX) stock plunged 27 percent on Oct. 24 after the company revealed it lost 800,000 U.S. subscribers in the third quarter and predicted even more cancellations over a price increase. The company hasn’t been able to contain a customer revolt over its price hike and aborted plan to force subscribers into separate streaming and DVD services. Netflix now forecasts losses in 2012 because of the costs associated with launching its service in the U.K. and Ireland. The company says it will delay further expansion until profitability is restored.
First Solar: Strategy Shakeup as CEO Leaves
First Solar (FSLR) slashed its forecasts for sales and profit in 2011 after ousting CEO Rob Gillette, saying it needed a shift in strategy to survive falling prices for solar panels. Gillette aggressively expanded First Solar’s production, almost doubling its capacity in a bet that thin-film panels could compete against polysilicon panels. Demand and prices for solar gear have been falling, driven down in part by increased output of polysilicon panels from Chinese manufacturers. Gillette is the third high-level executive at First Solar to leave this year.
Oracle: Looks Up to the Cloud
In an effort to broaden its reach in cloud computing services, Oracle (ORCL) agreed to pay $1.5 billion to buy RightNow Technology, a Web-based customer service specialist. RightNow (RNOW) helps companies provide customer service through call centers, social networks, and the Internet. Oracle has been building up its cloud capabilities since launching its Public Cloud last year, which offers “on demand” delivery of applications including sales force automation, human resources, and databases.