Earnings: Amazon Profit Drops 58 Percent In 2Q06; Sales Reven Up 22 Percent

Work in progress. Ah, the art of writing earnings releases. It takes Amazon (AMZN) five paragraphs to get to the 55 percent drop in operating income for 2Q06, to $47 million from $104 million in 2Q05. The next paragraph includes the news that earnings per share dipped to $22 million, or 5 cents per share, from $52 million in 2Q05, 12 cents per share. The Thomson First Call average estimate called for 7 cents per share. (Via MKTW.) The company prefers to highlight some other results including a 22 percent increase in sales revenue to $2.14 billion and the more than doubling of premium shipping Amazon Prime memberships at $79 per. The income drop was attributed to a change in expensing stock options and higher operating costs. Jeff Bezos (chairman, president and CEO) said the higher costs are linked to investments in Amazon Prime and technology and that technology investments will be lower in the second half.
— Sales revenue from the Media segment rose 16 percent to $1.4 billion; last year in the same quarter Media was up 20 percent.
Amazon inserts: As it happens, my mail today included the gift of a book (the appropriately named “Heat”) purchased through Amazon. When I opened the package, a batch of adverts fell out: offers for Vonage; ING Direct; discounts or free shipping for the NYT print edition (no mention of TimesSelect), RedEnvelope.com, PhotoStamps.com, Omaha Steaks, JCP.com (JCPenney); and a glossy TiVo ad offering $150 off purchases of boxes and service through Amazon. The TiVo tag line: “Get ready to say ‘Wooo Hooo!” a lot more. The insert also focuses on TiVo Kidzone while pitching portability and broadband content from “podcasts, web video, and radio.”
From the earnings call: Bezos, asked about Amazon’s long-term vision went into a long response that’s defies soundbite … one excerpt: “Our strategy for our business is a three-fold with respect to finding the elements that matter to customers that are durable in time where we can build flywheels that we can continue to put energy into. The three big flywheels are selection, price and availability.”
Earnings | Webcast (replay) | Transcript (SeekingAlpha.com)

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