In a battle to place American products in the hands of those in the developing world, Amazon.com, Inc. (NASDAQ:AMZN) has just made a move that could secure it a heap of profits.
On June 13, Amazon.com, Inc. (NASDAQ:AMZN) launched its Kindle Fire HD tablet and the Kindle Paperwhite e-book reader in India. This comes about one week after the company unveiled an online marketplace in India.
The company is pursuing what others such as Sprint Nextel Corporation (NYSE:S) and Apple Inc. (NASDAQ:AAPL) have shown recent signs of taking on: tapping into a market consisting of millions of new middle-class consumers. This is the result of the increasing standard of living in developing nations, and could fuel a multi-trillion-dollar market.
Amazon’s stellar financials
Worldwide expansion is one reason to buy Amazon.com, Inc. (NASDAQ:AMZN), but the company’s income statement is another. The firm has increased its revenue from over $24 billion in 2009 to more than $61 billion in 2012, representing a climb of about 150% in just a few years. The profit margin, however, is lower due to the firm’s commitment to research and development, which took away over $4.5 billion. A healthy investment into R&D, though, is a sign that the company is committed to being a market leader which is something that all investors should look for. The company’s net profit closed at $116 million last year, representing a profit margin of a fraction of a percent.
Spint’s developing-world savvy
Sprint Nextel Corporation (NYSE:S) made headlines on June 11 when it announced its Sprint ZTE smartphone. The announcement that Sprint was entering the smartphone realm was one thing, but that the phone would be priced below $100 was another. At $99, the device is something many in the developing world can put into their hands. Other smartphone companies, including Apple Inc. (NASDAQ:AAPL), were rumored to be developing their own cheaper models, and two days later Apple confirmed the news (though we’ll have more on that later). Sprint Nextel Corporation (NYSE:S) could be the first smartphone manufacturer to generate significant revenue from the developing world.
Despite Sprint’s major announcement, shares only increased by about 2% on the day and have stayed around that level ever since. Now could be a good time to buy the stock, even though it is relatively speculative that Sprint Nextel Corporation (NYSE:S) will make major profits from its smartphone release. Investors, however, should proceed with extreme caution. Despite the company increasing its revenue by about 10% in the last four years, it has consistently been in the red. Last year, for example, the firm posted a loss of nearly $4.2 billion.
Apple’s developing-world savvy
While Apple Inc. (NASDAQ:AAPL) hasn’t released a cheaper iPhone yet, the company announced that it would hit the markets sometime in the next year. The phone could really take a hold in developing nations if it is priced under $100. Apple has the ability to market in the developing world better than Sprint Nextel Corporation (NYSE:S) due to its massive amounts of disposable cash flow.
Apple Inc. (NASDAQ:AAPL) continues to grow its revenue, which has skyrocketed in recent years. One of the company’s most attractive features is the cost of sales. While the company’s revenue went up by about 265% in the last four years, its operating expenses have only increased by 225%. That shows that the company is becoming more efficient in the way it does business. Competition from companies such as Sprint and Amazon.com, Inc. (NASDAQ:AMZN) could take away Apple’s dominant market share, however.
The amazing race
Each company is racing around the world to secure profits from developing nations. While both Amazon.com, Inc. (NASDAQ:AMZN)and Apple Inc. (NASDAQ:AAPL) have shown they are efficient at building strong business empires in the United States (as has Sprint Nextel Corporation (NYSE:S), though to a lesser extent), the global business market is a completely different game. The firms don’t have a book on how to sell smartphones and tablets to developing nation consumers; they have to write the book, and that is a completely different challenge than what they are used to at home.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Inc. (NASDAQ:AMZN) and Apple. The Motley Fool owns shares of Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL).
The article Tech Giants Look for World Domination originally appeared on Fool.com.
Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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