Google and Amazon Should Merge and Other Orwellian Investor Ideas

NEW YORK (TheStreet) -- In light of Amazon's (AMZN) disclosure of a so-called "octocopter," a prototype delivery drones that will inevitably grow into a robotic brigade large enough to blot out the sun in most urban areas, I combed my mind to think of the dumbest thing I could say about the world's largest online retailer. 

Here it is: Amazon and Google (GOOG) will eventually merge to form a corporate monolith powerful enough to make Blade Runner's Tyrell Corporation look like a friendly small business.

I mean what other conclusions can you draw from Amazon's drone announcement, made on CBS's (CBS) 60 Minutes?

According to my Twitter (TWTR) feed, Bezos's delivery drones, part of a new service called Amazon Prime Air, are certain to put FedEx (FDX) and the U.S. Postal Service out of business. And to think it was only a month ago that the media said Amazon's decision to create Sunday delivery for Prime customers in New York and Los Angeles would be the saving grace for our friends at the cash-strapped postal service? 

Bezos's "octocopters," Tesla (TSLA) CEO Elon Musk's so-called 'hyperloops' and digital currencies bring out the worst a the hyperbolic and hamster wheel running media industry. Why deal in facts, sober analysis and disclaimers when you can present a completely new vision of the world to readers on an almost daily basis?

Buckminster Fuller would be a trillionaire in today's market.

The unveiling of the octocopter and Bezos' reference to a "Secret lab 126" in California on 60 Minutes was seemingly designed to bring out the hype in the media industry. The internet needs and wants shiny new things.

So it seems the base case is that when -- not if -- Amazon launches its drone army, it will sow the demise of traditional mail. Never mind that it doesn't appear the drones will actually deliver mail and or anything weighing over 10 pounds. Moreover, it only seems applicable to urban areas. Bezos also conceded that there's a lot more technological work needed to ensure that flying delivery drones won't present a danger to urban society and that the Federal Aviation Association will ultimately be the arbiter on the feasibility of the project.

"It will work and it will happen," Bezos said on 60 Minutes. Given his libertarian bent, maybe this is Bezos' revenge for the Stamp Act of 1765.

If we are going to define Amazon by every prototype idea that comes out of the PR department of the Seattle-based retailer, I want to up the ante on the speculation.

So here it is: Amazon and Google are a perfect fit.

Think about it. Amazon is the disrupting force in retail and publishing,while Google commands an ever larger share of the advertising market through its suite of internet search products, software and tech services. Amazon Web Services is fast becoming an IT powerhouse, while tech reporters speculated for months about whether Google was building a floating data center in San Francisco Bay, only to be disappointed when Google said its Bay Area barge was just "an interactive space where people can learn about new technology."

Overall, I'm seeing a lot of synergy.

Meanwhile, Amazon and Google are developing countless ancillary products -- whether it's streaming video in Amazon's case or Google Glass and driverless cars in Google's case -- that appear to mesh well together. Furthermore, some of Amazon's products like the Kindle Fire HD tablet may fail where Google designs actually succeed.

If both Amazon and Google are fast at work trying to revolutionize publishing, retail, TV, automotive, cable, broadband, travel, advertising, and IT industries, I say the most revolutionary speculation would be to envision a world where both firms are combined.

It would be fulfilling in the sense that the dreams of sci-fi luminaries like Philip K. Dick, Arthur C. Clarke and George Orwell would finally be realized!

There is a problem, however, when the media and investors go down the rabbit hole of futuristic thinking without grounding their analysis in present facts. That problem is particularly acute when dealing with companies like Amazon and Google, which promise so much.

"We encourage investors to focus on the story, not one particular data point," Morgan Stanley analysts said in April when outlining their expectations for Amazon's all-important first quarter earnings. In terms of tangible earnings that investors can bank on, Amazon delivers no profitability, and is judged instead on metrics like its "cash conversion spread," its consolidated segment operating income (CSOI) margins, another non-GAAP metric.

From what I can tell, FedEx generates more profit and earnings before interest, taxes, depreciation and amortization (EBITDA) delivering goods than Amazon does in selling them.

Amazon and Google's respective over $175-billion and $350 billion market caps, however, can almost be justified by the fact that mobile app startups are fetching multimillion dollar valuations without generating a penny of revenue.

This leads to my final point.

Amazon's Bezos did say profound things about the company's future in his 60 Minutes interview, but these things it had to do little with the media's obsession du jour: Bezos's octocopter delivery drones.

"Companies have short lifespans, Charlie, and Amazon will be disrupted one day," Bezos said to Charlie Rose in the 60 Minutes interview. "I don't worry about it because I know it's inevitable. Companies come and go and it's the companies that are the shiniest and most important of any era... you wait a few decades and they are gone," he added.

Amazon, like Google and Apple (AAPL), is obviously one of the iridescent American companies of the moment. Much speculation about all three companies surrounds their next step. Will Amazon or Apple transform the set top box? Are rollouts like Google Fiber poised to upend the bundled cable and broadband industries?

I spent part of my summer profiling Eastman Kodak's  (KODK) and thinking about many of the ideas that Bezos expressed in the final moments of his interview with Charlie Rose.

One of the revelations in my reporting was that Kodak has a trove of research and development that fit growing markets in today's economy. Who knew Kodak's technology could manufacture touchscreens, batteries, circuitry and some types of semi-conductors?

Kodak was once an Amazon and Google-type company, constantly inventing new technologies and seeking ways to open new markets. The problem was that Kodak spent much of its time defending its legacy film businesses with incremental innovations and left many of its best digital imaging, computing, and commercial printing innovations in R&D labs for far too long. Others did the disrupting, not Kodak.

When investors look at Amazon's new projects -- for instance delivery drones, AWS, the Kindle E-reader, or its foray into grocery selling -- they should believe that Bezos & Co. are devoting their time and resources to their best ideas. My own thought is that octodrones only serve a marginal need for Amazon users and are a diversion from the real success the company has made in pushing into the media and IT industries.

--Written by Antoine Gara in New York

Follow @antoineGara

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