Amazon.com, Inc. (NASDAQ:AMZN) may be forced to rethink its business strategy going forward, if it is to be able to compete against the more profitable Alibaba, which is closing in on its Initial Public Offering. The upcoming Alibaba IPO according to Warburg Pincus’ Bill Janeway in an interview on Bloomberg is expected to result in a major shakeup on the e-commerce side of the business, in terms of competition between Amazon and Alibaba.
Janeway reiterated the fact that Alibaba will be a major competitor for Amazon.com, Inc. (NASDAQ:AMZN) because it is operating in China where it is unchallenged at the moment. Alibaba is also expected to be a darling with investors on the fact that it is profitable compared to Amazon, which has thin profit margins.
Amazon is now expected to compete against Alibaba that according to Janeway is un-challenged back at home at the back of a massive population that essentially provides it with a bigger marketplace online.
“[…] For a long time Jeff Bezos [CEO of Amazon] has achieved nirvana in the stock market. Maximize growth subject to the minimum amount of profit necessary to keep people happy,” said Mr. Janeway
It still has to be’ seen whether Amazon.com, Inc. (NASDAQ:AMZN) will now change its business strategy in a bid of accommodating the new competition in the space. Amazon has over the years pursued growth, a move that has considerably affected its profit margins.
Alibaba is going to hold one of the biggest IPO in the U.S., and with its massive presence in Asia, Amazon will need to be up to the task if it’s to maintain its market share or even get an opportunity to grow it further.
Alibaba is going to hold its IPO at between $60 and $66 a share valuing the company at$162.7 billion. Janeway also pointed out that Alibaba may not have it all straight in the industry, without facing stiff competition from other well-established companies in the space.
“[…] Alibaba is coming at Google Inc. (NASDAQ:GOOGL), Amazon, the established leaders on the Internet economy, but these guys are not like General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) when Toyota Motor Corp (ADR) (NYSE:TM) came out 25 years ago. These guys are innovating, they do have tremendous creativity and they do have big cash resources. The cash flow potential to be able to compete; this is going to be very long extended competition in the global market,” Mr. Janeway added.
Fisher Asset Management, led by Ken Fisher, held 2.47 million shares of Amazon.com, Inc. (NASDAQ:AMZN) at the end of the second quarter of 2014.
Disclosure: none
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