Amazon.com's profit tumbles more than expected

Apr 26, 2011 By JORDAN ROBERTSON , AP Technology Writer
In this Nov. 11, 2010 file photo, Katherine Braun sorts packages toward the right shipping area at an Amazon.com fulfillment center, in Goodyear, Ariz. Amazon.com Inc., releases quarterly financial results Tuesday, April 26, 2011, after the market close. (AP Photo/Ross D. Franklin, file)

(AP) -- Amazon.com said Tuesday that its net income fell 33 percent in the latest quarter, a steeper drop than Wall Street expected as the online retailer poured more money into expanding its operations.

While Amazon's profit was a disappointment, its revenue topped expectations. The company's management says that the stronger sales mean Amazon needs more warehouses and upgraded technology, which require bigger investments that cut into earnings.

The world's biggest online retailer is also facing competitive challenges from Wal-Mart Stores Inc. and other rivals, and is spending to shore up its lead.

Amazon's expansion is also being complicated by ongoing battles with states over when Internet retailers should be forced to collect sales taxes from their customers.

And Amazon's Web hosting service, one of the Seattle-based company's biggest new initiatives, suffered an embarrassing setback last week. Major websites that use the service, including Foursquare and Reddit, crashed or suffered slowdowns, raising questions about the reliability of Amazon's "cloud computing" offerings.

Shares of the Seattle-based company dropped about 6 percent when the results were reported after the stock market's close Tuesday. They recovered some and down $3.05, or 1.7 percent, to $179.25.

The stock's recovery from its extended-trading lows appeared to reflect investors' belief that Amazon's expansion may be costly but will make the company more competitive.

Thomas Szkutak, Amazon's chief financial officer, said the higher expenses were directly related to higher demand for the goods sold on Amazon.

"We're just seeing tremendous growth, and because of that we're having to invest in a lot of capacity," he said on a conference call with reporters. He added that Amazon's international sales took a hit from the deadly earthquake and tsunami in Japan on March 11, which also cut into Amazon's profit.

The company said after the market closed that its net income was $201 million, or 44 cents per share, down from $299 million, or 66 cents per share, a year ago. The earnings were well short of the 61 cents per share that analysts polled by FactSet expected.

But revenue rose 38 percent to $9.86 billion, ahead of the $9.54 billion that analysts were forecasting, and up from $7.13 billion a year ago.

Amazon's second quarter revenue guidance also topped analysts' projections.

Amazon says it expects revenue of $8.85 billion to $9.65 billion. Analysts were expecting $8.75 billion.

Explore further: Apple set to shut down Beats music service: report

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Amazon profit up 68 pct; outlook scares investors

Apr 22, 2010

(AP) -- Amazon.com Inc. said Thursday that its first-quarter profit surged 68 percent, showing that consumers are even more comfortable opening their wallets to the online retailer as the economy slowly improves. But investors ...

Amazon 2Q profit jumps 45 pct; misses Wall Street

Jul 22, 2010

(AP) -- Amazon.com Inc. said Thursday that its second-quarter income jumped, bolstered by shoppers who spent more with the online retailer even as consumer confidence fell overall.

Amazon 3Q profit jumps 16 percent, but costs rise

Oct 21, 2010

(AP) -- Amazon.com Inc. saw earnings grow in the third quarter as shoppers bought more goods and services, yet costs also rose because the company is having to build new centers to fulfill those orders. Shares ...

TI 2Q revenue rises 42 pct as demand roars back

Jul 19, 2010

(AP) -- Texas Instruments Inc.' second-quarter income and revenue jumped as demand continued to recover after the recession. The company predicted even better results in the new quarter.

Recommended for you

Line says no IPO this year

16 hours ago

The Japan-based operator of popular mobile messaging app Line said Monday it has decided not to go ahead with an initial public offering in Japan or overseas this year.

User comments : 0