Amazon's Net Income Drops as Spending Rises

By

Increased spending on new products like Kindle Fire is cutting Amazon’s profit margin. The world’s largest Internet retailer reported a plunge in third-quarter profit after it ramped up spending on new products such as the Kindle Fire tablet. The shares tumbled 19 percent in late trading on Tuesday.

The Internet retailer’s financial report indicates that the company’s net income fell 73 percent to $63 million, or 14 cents a share, from $231 million, or 51 cents in 2010. According to Bloomberg, Amazon missed the 24 cents predicted by analysts. Amazon also said it may post an operating loss this quarter, as per Bloomberg’s report.

As per this report, Amazon is sacrificing profit margins in search of sales volume and market-share gains. Also, it is selling its Kindle Fire tablet for as low as $199, almost less than half the price of Apple’s cheapest iPad. Amazon’s CEO Jeff Bezos is counting on revenue from digital music, books and movies to make up for selling the product at a loss, wrote Bloomberg reporter Danielle Kucera.

The report quoted Robert W. Baird & Co analyst Colin Sebastian, as saying, “They missed investors’ expectations… The companies’ growth plans aren’t doing enough to spur profit, rather than just sales,” he added. “If they don’t show a corresponding increase in earnings, investors start to scratch their heads,” continued Sebastian.

The company said that fourth-quarter operating results may range from a loss of $200 million to a profit of $250 million. However, as per Bloomberg’s report, analysts were projecting a gain of $512.7 million. While Amazon is expecting sales to be around $16.5 billion to $18.7 billion.

Analysts have indicated that the internet retailer is also losing money due to shipping expenses. Under a prime program, Amazon has been offering unlimited two-day shipping for $79 a year. Consequently, shipping fees generated were only $360 million in the third quarter, substantially lower than the actual $918 million in shipping expenses.


Ashok Bindra is a veteran writer and editor with more than 25 years of editorial experience covering RF/wireless technologies, semiconductors and power electronics. To read more of his articles, please visit his columnist page.

Edited by Rich Steeves

TechZone360 Contributor

SHARE THIS ARTICLE
Related Articles

How Your Business Can Reorient Content Delivery to Be More Inclusive

By: Contributing Writer    1/25/2022

As a company owner, it's your responsibility to ensure that your business can realize its full potential, even in a competitive industry. It might not…

Read More

11 Highest Paying Technology Jobs in Data Analytics and Science

By: Contributing Writer    1/24/2022

The art of data science and analytics is being able to find relevant relationships and connections within large amounts of data sets. It is a sector o…

Read More

Microsoft to Become Third Ranked Gaming Company with Activision Buyout

By: Laura Stotler    1/19/2022

Microsoft is poised to become the third largest global gaming company with its announcement that it will purchase Activision Blizzard in a $68.7 billi…

Read More

What Is an XS-Leak Attack?

By: Contributing Writer    1/19/2022

The "same-site" origin policy (SOP) is a critical piece of online security. While it's not an internet standard, but rather a rule enforced by interne…

Read More

Interactive Displays For Education- Here's What You Should Know

By: Contributing Writer    1/19/2022

Undoubtedly, the amount of attention and enthusiasm kids show in their studies significantly impacts their depth of understanding and retention level.…

Read More