Amazon told a now-familiar story in its third-quarter earnings report this afternoon: High sales, low profits — but this time profits were even lower than analysts had expected. Shares were down in after-hours trading.
The company reported a loss of $274 million, or $0.60 per share, compared to net income of $63 million, or $0.14 a share, in the same period a year ago. Some of those losses stemmed from Amazon’s investment in struggling daily deals site LivingSocial. Without LivingSocial, losses would have been $0.23 per share, which failed to meet analysts’ forecasts for losses of $0.08 per share.
Not surprisingly, Amazon glossed over the losses. “Our approach is to work hard to charge less. Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point,” CEO Jeff Bezos said in the earnings release. A couple weeks ago, Bezos admitted to the BBC that “we sell the hardware at our cost,” something that had long been rumored. Now it seems the company will try to trumpet this as a positive. In an investor call following the report, CFO Tom Szkutak — Bezos wasn’t on the call — reiterated, “We like the idea of selling our Kindle Fires and then being rewarded through purchases of content going forward.”
Earlier this week, Amazon sent out Kindle Fire bullet points to reporters, including the fact that the $199 Kindle Fire HD is the company’s bestselling product even though it hasn’t started shipping yet. That fact was repeated in today’s report, along with the Amazonian non-statistic that “the next two bestselling products worldwide are our Kindle Paperwhite and our $69 Kindle. We’re selling more of each of these devices than the #4 bestselling product, book three of the Fifty Shades of Grey series.”
North American media sales were up 15 percent, to $2.2 billion. International media sales were up 7 percent, to $2.4 billion.
For the fourth quarter, Amazon advised investors to expect revenues between $20.25 billion and $22.75 billion, with guidance for profits ranging from -$490 million to $310 million.
Photo courtesy of Flickr / William Christiansen