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Heavy Kindle investment impacts upon Amazon's profits

Amazon has reported a 73% fall in profit to $63 million for the three months to 30 September. This is despite a 44% rise in sales to $10.88 billion.

Operating expenses increased by 48% mainly due to a higher cost of sales.

The online retail giant invested heavily in its new Kindle tablet computer during the period which has affected profits.

Amazon said that Kindle Fire pre-orders had exceeded expectations and that the company was making “millions more” to meet demand. The new models start shipping in November.

Jeff Bezos, founder and CEO of Amazon.com, said in a statement: "September 28th was the biggest order day ever for Kindle, even bigger than previous holiday peak days."

"In the three weeks since launch, orders for electronic ink Kindles are double the previous launch. And based on what we're seeing with Kindle Fire pre-orders, we're increasing capacity and building millions more than we'd already planned."

Despite the demand for the new models, Amazon's earnings for the quarter fell below expectations and as a result shares dropped almost 20% in late trading.

The company also forecast lower-than-expected sales for the upcoming quarter, which includes the Christmas holiday season, and said there could even be an operating loss due to continued investment in the Kindle Fire.

For the next quarter, the online retailer is expecting revenue of $16.5 billion to $18.7 billion which could be less than analysts’ expectations of $18.1 billion.

Source : The Retail Bulletin
www.theretailbulletin.com/news/amazons_profits_fall_73_26-10-11/

26 October 2011
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