Retail
Amazon reports 73 percent drop in 3Q income
By Seattle Business Magazine October 25, 2011
Seattle-based retail giant Amazon.com reported a 73 percent decrease in net profits for its third quarter. The company earned $63 million for the quarter, or 14 cents per share. The company earned $231 million, or 51 cents per share, during the same quarter a year ago.
Revenues rose 44 percent during the period to $10.9 billion, but the company substantially underperformed on analysts predictions of 24 cents per share and $11 billion in revenue. The company attributed the drop in profit to the capital spent to develop the latest line of Kindle products. The company also added 8,000 new hires in the period pushing total employment to 50,000.
Analysts were also concerned by reports that Amazon’s new Kindle Fire tablet is being sold for as much as $50 below production costs to compete with Apple’s iPad. Amazon hopes to make up for those losses with sales of movies, music and books to consumers who buy the tablets, but it’s unclear whether those additional sales will materialize.
Company shares were off nearly 15 percent in after-hours trading at around $195 a share Tuesday.
Amazon’s results come on the heels of a blockbuster second quarter, in which the company experienced a 51 percent growth in sales. The company also predicts significant sales growth in the fourth quarter of this year in part from sales of its new line of Kindle tablets.
CEO Jeff Bezos said the companys new Kindle devices were outperforming expectations. Based on what were seeing with Kindle Fire pre-orders, were increasing capacity and building millions more than wed already planned, he said in the earnings release.Orders for Kindles are already double those from the previous Kindle launch in the three weeks since the new series was announced.
Amazon expects net sales of between $16.45 billion and $18.65 billion for the current quarter. The company cites operating income ranging from a $200 million loss to $250 million in operating profits.