Feeds

Amazon blames grinch that stole Christmas

With profits falling, analysts question e-tailing myth

The essential guide to IT transformation

Amazon.com became the fourth of the internet giants to report lower than expected profits this week. Despite gaining revenue over the previous Christmas, Q4 profits were down, and the company predicted lower profits still for the current quarter.

More ominously, Amazon says it expects to have lower profits for the third successive year, prompting analysts to pose some awkward questions. One even wondered if the supposed efficiencies of internet-only commerce are mythical.

But first, the numbers.

The retailer reported $2.98bn in sales for Q4, with net income at $199m, compared to $347m in Q4 2004. Sales for the year rose 23 per cent to $8.49 billion with net income of $359m, down from $588m for 2004.

US and Canada accounted for $1.68 billion, although oversees sales didn't grow as fast as Amazon would have liked - accounting for 45 per cent of revenue, barely up from 2004. Twenty-eight per cent of sales came from third party merchants.

The company predicted a profit of between $70m and $105m for the current quarter, with sales growing between 16 per cent and 23 per cent for the full year, compared to 2005.

CEO Jeff Bezos said the company was using its increased cash flow to invest, particularly in its A9 search engine, and he admitted the company's $79 Prime subscription package, which gives subscribers free shipping for a year, was proving expensive.

Analysts even queried Amazon's growth, with JP Morgan's Imran Khan (no, not that Imran Khan) suggesting Amazon may be losing market share.

Prudential's Mark Rowen wondered what was more efficient about an e-tailer, compared to a bricks and morter retailer with real estate burdens, when expenses were so much higher than Wal-Mart.

"Why is it that we are not seeing efficiency if, in fact, the model is more efficient?"

Ouch.

Bezos again stressed Amazon.com needed to invest for the future, in particularly digital services, adding that "if we were totally optimizing our cost structure for a kind of a steady-state business, you would see a different cost structure."

This prompted a withering piece of sarcasm from one analyst, Safa Rashtchy of Piper Jaffray. who told the WSJ: "It seems like Amazon is a company which will perpetually be in investment mode."®

Next gen security for virtualised datacentres

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Banking apps: Handy, can grab all your money... and RIDDLED with coding flaws
Yep, that one place you'd hoped you wouldn't find 'em
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
prev story

Whitepapers

A new approach to endpoint data protection
What is the best way to ensure comprehensive visibility, management, and control of information on both company-owned and employee-owned devices?
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.