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Amazon reports rare profit and is punished by Wall Street

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E-retail bellwether Amazon badly missed Wall Street expectations on Thursday, causing its shares to fall – even though it reported a healthy profit.

The e-retail giant reported earnings per share of $0.51 and net sales of $25.59bn for its fourth quarter of 2013 on Thursday, missing Wall Street estimates of $0.66 and $26.06bn by a wide margin. As a result, Amazon's shares were trading down around four and a half percent on Thursday.

Some of the softer-than-expected growth may have come from weakness in international markets, and from consumers switching over to buying more low-cost digital items over physical ones, Amazon CFO Tom Szkutak said on an earnings call to discuss the results.

In a change for the typically profit-shy company, Amazon reported an operating income of $510m for the quarter, compared with a loss of $25m in the previous quarter, and a profit of $405m in the fourth quarter of 2012.

It also reported strong growth in the "other" revenue section, in which it hides its Amazon Web Services cloud – though these numbers demonstrated slower quarter-on-quarter growth than before.

"It's a good time to be an Amazon customer," said the company's chief Jeff Bezos in a statement. "You can now read your Kindle gate-to-gate, get instant on-device tech support via our revolutionary Mayday button, and have packages delivered to your door even on Sundays."

Those good times may not go on for long, though, as on the earnings call Szkutak said Amazon was planning on raising the price of the company's $79-per-year Amazon Prime service by between $20 and $40.

Sales for the full year were $74.45bn compared with $61.09bn in 2012, and operating income for the year was $745m.

During 2013, Amazon released new Kindle models, made multiple upgrades to Amazon Prime, expanded its Amazon Studios programs in response to continued investment by Netflix, made numerous upgrades and enhancements to its Amazon Web Services cloud, and took part in a televised fluffathon in which it told the world it was investigating delivery-by-drone technology.

Purchases of property and equipment – data centers and warehouses, mainly – fell to $3.44bn for the quarter compared with $4.59bn in the previous quarter.

This, combined with slowing growth in the bit barn-based Amazon Web Services division caused analysts on the call to ask whether Amazon expected slower growth in the future; Amazon's chief financial officer Tom Szkutak denied this. ®

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