FedEx founder calls Amazon drones 'mythology' - FOX13 News, WHBQ FOX 13

FedEx founder calls Amazon drones 'mythology'

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    Friday, October 4 2013 3:43 PM EDT2013-10-04 19:43:45 GMT
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MEMPHIS, Tenn. (FOX13) -

During the second quarterly earnings call Thursday with FedEx founder and CEO Fred Smith said drones in development by Amazon.com to deliver light freight weight packages is a "mythology."

A question was posted to Smith: Would these drones, once off the ground, be considered competition to the shipping giant FedEx?

Smith's short answer was no.

MORE: Amazon.com sees Prime Air drones as the future of the delivery business

"We have a drone expert on staff," Smith said. "Rob carter, our CIO actually owns a drone. He reported it can operate about eight minutes and carry about four Budweiser beers at his farm."

Earlier in December Amazon unveiled its intention to use drones to deliver light weight packages within 30 minutes of ordering, sort of like a modern version of a pizza delivery driver, minus the driver.

Amazon.com said it's working on the so-called Prime Air unmanned aircraft project in its research and development labs. But the company says it will take years to advance the technology and for the Federal Aviation Administration to create the necessary rules and regulations.

"Quite frankly I don't think I've seen more mythology in the press about anything than I have about the e-commerce piece over the last year or so," Smith said.

The drones don't make sense when you already have two major companies -- FedEx and UPS -- moving small packages, along with the U.S. Postal Service Smith added.

"The size and scale of the operations are so big that it's almost amusing the comments about delivering items by drones," he said.

When attending Yale, the story goes Smith received a C on his paper detailing his business plan for FedEx, for not being realistic or feasible. So he's not one to completely shoot down an idea.

"Now that's not to belittle the technology because we've got a lot of studies underway in that area," Smith said.

While FedEx may eventually have to cope with online retailers making their own local deliveries, right now it is dealing with customers shifting from overnight delivery service toward cheaper ground transportation. That shift was a factor in the smaller-than-expected gain in FedEx's second-quarter profit reported on Wednesday.

Revenue and U.S. volume both fell slightly in FedEx's express unit, which handles overnight shipments and is the company's largest division. Ground shipping revenue rose 10 percent, and freight revenue was up 4 percent.

Even with shippers moving away from express, cost cuts in that unit drove most of the company's profit growth.

FedEx Corp. net income rose 14 percent to $500 million, or $1.57 per share. Analysts had been expecting $1.64 per share.

A year earlier it earned $438 million, or $1.39 per share. It said superstorm Sandy hurt last year's profit by 11 cents per share.

Edward Jones analyst Logan Purk said FedEx executives once had to manage the shift from its old business of delivering urgent letters, which was replaced by email. Now they'll do it again as customers increasingly favor ground over air shipping.

"They are once again reinventing the business in response to the conditions the market is throwing at them," he said.

Shares of Memphis, Tenn.-based FedEx Corp. fell 31 cents to $138.78 in afternoon trading.

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Associated Press reporter Joshua Freed contributed to this report.

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