Feeds

Amazon’s shares slashed as profits drop 73%

Sales OK, but costs through the roof

Build a business case: developing custom apps

Amazon’s share price dropped sharply after it reported overall profits have fallen 73 per cent year on year.

The third quarter of the year is traditionally the slowest for retailers, but the company reported that net sales rose 44 per cent from this time last year. However, the company is selling its Kindle hardware at a loss, and has also invested heavily in backend infrastructure this quarter, in particular new warehouses (and air conditioners El Reg hopes.)

Other areas of investment for the company include setting up new Amazon Web Services (AWS) features, such as its virtual private cloud systems and the hardened AWS GovCloud service designed to win federal business. Presumably a fair amount of funds have also been spent strengthening its EC2 backbone after this year’s outages.

However, it is the company’s policy on the Kindle that has Wall Street most worried. Amazon is selling the Kindle Fire at $199, massively undercutting Apple’s iPad. As HP demonstrated with the TouchPad fiasco, there is strong consumer demand for low-cost tablets, but whether Amazon can make enough back in media sales to offset the low purchase price remains to be seen.

"In the three weeks since launch, orders for electronic ink Kindles are double the previous launch,” said Amazon’s CEO Jeff Bezos in a statement. “And based on what we're seeing with Kindle Fire pre-orders, we're increasing capacity and building millions more than we'd already planned."

Looking ahead, the company estimated its operating income next quarter would range between a loss of $200 million and a profit of $250 million, both well below last year’s figures. The fourth quarter is traditionally the strongest for retailers like Amazon, but the company is lowballing estimates of the quarter in advance, suggesting expected profits will not be good.

The essential guide to IT transformation

More from The Register

next story
Microsoft exits climate denier lobby group
ALEC will have to do without Redmond, it seems
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 ...
Kate Bush: Don't make me HAVE CONTACT with your iPHONE
Can't face sea of wobbling fondle implements. What happened to lighters, eh?
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
True fact: 1 in 4 Brits are now TERRORISTS
YouGov poll reveals terrible truth about the enemy within
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
prev story

Whitepapers

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.
7 Elements of Radically Simple OS Migration
Avoid the typical headaches of OS migration during your next project by learning about 7 elements of radically simple OS migration.
BYOD's dark side: Data protection
An endpoint data protection solution that adds value to the user and the organization so it can protect itself from data loss as well as leverage corporate data.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?