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Square Won't Be Profitable Until 2015

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    NEWSLETTERS

    Square isn't making money and likely won't be profitable until mid-2015, according to reports.

    The failure of Square Wallet seemed to seal its fate in the eye of analysts, but the reality is more complicated, Forbes reported. It hasn't been profitable and its debt is because of investment in new products -- some of which didn't work -- and 900 employees.

    "The gross profits we earn on transactions already pay for the non-growth expenses of the company," Roelof Botha, a partner at Sequoia Capital and a board member of Square, told Forbes. "We could be profitable tomorrow morning if we said, 'Lets not spend money to keep growing.' "

    Square makes $300 million a year in receipts, but so far its spending has exceeded that. However, Square estimates that it will start showing a profit in mid-2014, and it has a $225 million line of credit, so it disputes reports that the company may be bankrupt before a profit. Forbes reported that despite raising $367 million from investors, it's not clear if Square is still training to raise money  -- which would help its bottom line.

    On Tuesday, Square launched Feedback, a $10 subscription a month for merchants to follow up with customers on their experience, which it hopes will be successful. Perhaps it will because it could be seen as a way to reign in negative reviews, by stopping them before they happen. Other ideas revolve around its users' valuable data.
    Essentially the report means that if Square continues to be make money at its current rate, it will eventually hit equilibrium and make a profit. If those calculations are wrong, however, then Square may be facing insolvency.

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