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Amazon Shares Plunge as Profit Disappoints

Tuesday, 25 Oct 2011 04:58 PM

Amazon says its third-quarter net income sank 73 percent despite sales growth as the online retailer spent money to grow its business.

The Seattle-based company's earnings fell short of analyst expectations, and its revenue outlook for the current quarter failed to impress investors. Its stock fell nearly 20 percent in after-hours trading.

Amazon.com Inc. said Tuesday that it earned $63 million, or 14 cents per share, in the quarter. This compares with $231 million, or 51 cents per share, a year earlier.

Analysts polled by FactSet had hoped for much more: 24 cents per share in net income.

Revenue climbed 44 percent to $10.9 billion, in line with the nearly $11 billion analysts were looking for.

The company's media business, which includes products like books, CDs and DVDs, saw revenue rise 24 percent to $4.2 billion. Amazon's revenue from electronics and other general merchandise rose 59 percent to $6.3 billion.

But Amazon's operating expenses also climbed, rising 48 percent to $10.8 billion. The increase came mainly from a higher cost of sales. This is the third consecutive quarter in which Amazon's expenses have cut into its bottom line.

To support its growing business, Amazon has been opening order fulfillment centers at a rapid clip this year.

"You have to go back to year 2000 to see those kind of growth rates," Chief Financial Officer Tom Szkutak said during a conference call with reporters.

Amazon CEO Jeff Bezos also gave some details about the health of the company's family of Kindle e-readers. In Amazon's earnings release, Bezos said that Sept. 28 was the Kindle's "biggest order day ever." That day, Amazon trotted out several new Kindle models, including its first-ever tablet computer, the $199 Kindle Fire. Amazon began selling a $79 model and took advance orders for others.

The Fire, which will begin shipping in November, is Amazon's answer to Apple's popular iPad. Amazon sees the Kindles as a way to catalyze even more sales of the digital content it sells.

Bezos said advance orders for the Fire are so high that Amazon is making "millions more" than it had intended, and orders for other models since Sept. 28 have been double what it was for the company's last launch of a Kindle device.

As in the past, Amazon did not give any specific details about its Kindle sales.

For the holiday quarter — a period that is usually the best for retailers — Amazon expects revenue of $16.5 billion to $18.7 billion. Analysts are looking for $18.1 billion in revenue.

Amazon's stock sank $42.31, or 17.8 percent, to $195.30 in after-hours trading. The stock had fallen $10.46, or 4.4 percent, to finish regular trading at $227.15.

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Amazon says its third-quarter net income sank 73 percent despite sales growth as the online retailer spent money to grow its business.The Seattle-based company's earnings fell short of analyst expectations, and its revenue outlook for the current quarter failed to impress...
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2011-58-25
Tuesday, 25 Oct 2011 04:58 PM
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