Differing opinions on Project Kuiper
- by Advanced Television
- Oct 11, 2024
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October 11, 2024
Analysts at investment business Sanford C Bernstein are less than optimistic about Jeff Bezos and Amazon’s Project Kuiper broadband-by-satellite scheme. The launch dates for some of the first batches of satellites have slipped from Q4 this year to Q1 2025, but there’s more negative opinion now emerging.
Sanford analyst Mark Shmulik has previously been overall negative on Amazon, which he said last year was guilty of pursuing “too many ideas”. His latest opinion, contained in a letter to Amazon, says “Kuiper has no discernible competitive advantages over operating competitors” and even more critical, saying “even Google” figured out these aren’t businesses to pursue.
Shmulik’s advice is that Amazon should either seek outside funding or else trim its spend across its Healthcare division and Project Kuiper.
Specifically addressing Kuiper he says that more than $10 billion has already been committed.
“Perhaps there’s a lesson here from Google shutting [their balloon project] Loon and Fi businesses,” said Shmulik. “In our view Kuiper has no discernible competitive advantages over operating competitors, offering Internet connectivity to rural and international users [and] offers minimal synergies with the rest of the business.”
On the other hand, analysts at banking investment company Evercore ISI suggest that Kuiper might still manage between five and eight Kuiper launches in the pre-Christmas quarter-year. But they have a long way to go before completing their 3,236 satellites constellation.
“With Amazon beginning to launch satellites in Q4 in support of its Project Kuiper satellite-based internet service, we expect investors to focus more intently on the service’s associated costs and revenue opportunities,” Evercore ISI analyst Mark Mahaney wrote in a note on October 9th.
In the December quarter, Evercore expects Project Kuiper’s losses to ramp from approximately $650 million in the second quarter to between $600 million and $1 billion. That could rise to a range of $5 billion to $6 billion in 2025 “before meaningful revenue is generated,” wrote Mahaney.
Although the market is “rightly focused” on Kuiper’s investment costs, there may be an underappreciation of the size of its market opportunity, according to Evercore, which noted that rival SpaceX’s Starlink satellite revenue has gone from zero to almost $7 billion in four years.
Mahaney pointed to the “relatively attractive economics” of the satellite-internet segment, citing the 30 per cent to 50 per cent EBITDA margins among current competitors. Mahaney also highlighted the competitive advantages Amazon brings, based on its “very strong consumer presence and its extensive AWS ground infrastructure.”
In this way, Amazon could harness its “existing and expansive” on-the-ground AWS networking infrastructure to enable communications between satellites and end-users, according to Evercore.
Set against this backdrop, there may be opportunities to tie satellite internet to existing Amazon offerings. “We think Amazon could potentially bundle satellite-based internet service as part of Prime membership or offer the subscription to Prime members at a material discount to current offerings,” Mahaney said.
The first two Project Kuiper test satellites were launched in 2023. In June, Amazon said it is targeting its first full-scale Kuiper mission for the fourth quarter of this year, to be launched atop an Atlas V rocket from United Launch Alliance, the joint venture from Boeing and Lockheed Martin.
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