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Amazon earnings miss Street estimates, Kindle sales nearly triple

post #1 of 132
Thread Starter 
Amazon misses Wall Street expectations with a 57 percent decline in net income despite tripling Kindle sales during the holiday season.

In its fourth quarter 2011 earnings call on Tuesday, Amazon posted middling gains with $177 million in net income on steady EGM (Electronics and General Merchandise) sales and a $4.5 billion growth in overall revenue.

Net sales were up from the year ago quarter, which represents a $4.5 billion bump, however overall expenses offset the gain with a $4.7 billion rise.

The Kindle Fire maker did not disclose how many e-reader and tablet units it sold during the last quarter, though it did note that the Kindle line of products was up 177 percent from the same period a year ago. Today's results are in line with Amazon's December press release that claimed the company's new Kindle Fire tablet had sold "millions of units."

Amazon is not primarily a hardware manufacturer, and is selling its Kindle product line to move content through its ubiquitous online store.

According to analyst estimates, the company is losing anywhere from $5 to $10 on each Fire it sells, though Business Insider sees this as a part of the plan.

While the online retail monolith hasn't come close to matching Apple's success with the iPad, at least one analyst notes that Amazon is dominating the low-end tablet market with an estimated 6 million Kindle Fire sales.




“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe,” said Amazon CEO Jeff Bezos in a press release. “Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold.”

In contrast, Apple sold 15.4 million iPads during the quarter ending in December, and raked in $13 billion in its best quarterly performance to date.
post #2 of 132
Some of us predicted this (and take no joy in it).

This is just getting started. They'll probably have to pull or scale back Fire at some point.
post #3 of 132
Or they'll have to start charging more for them, taking away the only "real" advantage they have over the iPad. My guess is that they are not going to see the revenue stream from Fire users that they've built this model on. It's just not a sustainable model, unless they can get enough book sales and proprietary app sales to cover the cost - and I'd hate to be an Amazon accountant trying to determine how and where they're accounting for any recoup in cost.
post #4 of 132
Amazon is down 8.25% so far after hours.

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post #5 of 132
Their quarter was better than expected... not sure why the negative AI slant. They actually made a profit for the quarter!

That said... I am not buying until it is in the 160's. Don't see how their business plan is sustainable with the Kindle Fire, and it seems like they are putting more emphasis on it.
post #6 of 132
See Amazon?

Selling many pieces of cheap junk = windows pc's/samsung phones/pretty much all android devices in general such as your Kindle Fizzle... fo' shizzle.

The cherry on top is missing Wall Street estimates.
post #7 of 132
Its not a 5 to 10 dollar loss per unit, its a 50 dollar loss per unit according to posts before the kindle fires introduction. Its so easy to sell a product when your giving it away and furthermore losing money on every sale. Dump the hardware Amazon, stick to what you know.
post #8 of 132
Quote:
Originally Posted by JONOROM View Post

Amazon is down 8.25% so far after hours.

No... now the PE is up to 130... and in three months, it will likely be well over 200!! It must be going great with such a high PE ratio, right?

Sanity some day though...
post #9 of 132
Quote:
Originally Posted by tundraBuggy View Post

Its not a 5 to 10 dollar loss per unit, its a 50 dollar loss per unit according to posts before the kindle fires introduction. Its so easy to sell a product when your giving it away and furthermore losing money on every sale. Dump the hardware Amazon, stick to what you know.

They only lose $50 or so when you include their R&D and marketing costs.

Amazon needs to do something to lock people in once state sales tax agreements start to come into play. They have a couple years to become fully entrenched...
post #10 of 132
The point is not whether they make money. It is that they are roughly, vaguely, somehow ANDROID! Android tablets are now, what, 40% of the market? The BS talking point is all that matters to some.
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Apple has no competition. Every commercial product which competes directly with an Apple product gives the distinct impression that, Where it is original, it is not good, and where it is good, it...
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post #11 of 132
You guys have zero ability of running a company.

What Amazon loses per unit, they make up for it in volume.

</sarcasm>

Sorry... it was a sad attempt to imitate Slapppy.
post #12 of 132
Quote:
Originally Posted by jmgregory1 View Post

Or they'll have to start charging more for them, taking away the only "real" advantage they have over the iPad. My guess is that they are not going to see the revenue stream from Fire users that they've built this model on. It's just not a sustainable model, unless they can get enough book sales and proprietary app sales to cover the cost - and I'd hate to be an Amazon accountant trying to determine how and where they're accounting for any recoup in cost.

That won't be necessary as hardware costs especially in tech decrease over time, and these days that's sooner rather than later. I'd venture to guess you're not very comfortable with loss leader type models. No doubt they're tough but it's basically how cell carriers work too. What puzzles me is why Amazon went so aggressive from the gate. If they had gone with even 249, they would have built a small profit and probably made at least 3/4 of the same sales anyway, and cut it to 199 in 6 months when the costs come down. Oh well, not my problem.
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post #13 of 132
Quote:
Originally Posted by aaarrrgggh View Post

Their quarter was better than expected... not sure why the negative AI slant. They actually made a profit for the quarter!

That said... I am not buying until it is in the 160's. Don't see how their business plan is sustainable with the Kindle Fire, and it seems like they are putting more emphasis on it.

Was that sarcasm?

I've been trying to find a positive spin on the net about Amazon's quarter but the closest I've found is a headline from CNN stating that Amazon's earnings are OK... other than that the news is negative.
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post #14 of 132
Quote:
Originally Posted by anantksundaram View Post

Some of us predicted this (and take no joy in it).

This is just getting started. They'll probably have to pull or scale back Fire at some point.

Why? The Kindle Fire is not what compressed margins this quarter. Amazon's margins have been suppressed for the past few quarters due to the huge spending on physical warehouse construction, cloud infrastructure build-out, video on demand build-out, and feature discounts. Amazon continued this trend with $500 billion USD in infrastructure expenditures.

What came out of the blue was Amazon's buy back of 1.6 million shares of stock at over $600 million USD. It has been a while since they bought back stock. Net income would have been over $750 million USD instead of the $177 million USD without the buyback.

I am glad to see the investments to improve their physical and financial positions.

This was hardly a miss. Amazon managed a $0.38 per share earnings, crushing the street's estimste of $0.17.
post #15 of 132
Quote:
Originally Posted by sflocal View Post

You guys have zero ability of running a company.

What Amazon loses per unit, they make up for it in volume.

</sarcasm>

Sorry... it was a sad attempt to imitate Slapppy.

Actually, this shows that Apple now has real competition and will soon be in second place for tablet sales. By this time next year Samsung and Amazon will be selling 3 tablets for every one that Apple sells.

</slappy>
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post #16 of 132
This is the poster child for a POS, over-valued stock. I look forward to keeping and expanding my short position if it stays at these still high after-market stock prices. It should have easily dropped $30

Only Amazon could whiff on their quarter, guide lower for the next quarter, and still have a P/E expansion

Last, why do they continue to hide Kindle sales? If I was long, I would be pretty upset that they are hiding the economics and performance of a product that is fundamental to the prospects of the company. It's bizarre

I can't wait for the impact when Apple brings down the hammer and prices the iPad 2 @ $399

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post #17 of 132
Quote:
Originally Posted by island hermit View Post

Actually, this shows that Apple now has real competition and will soon be in second place for tablet sales. By this time next year Samsung and Amazon will be selling 3 tablets for every one that Apple sells.

</slappy>

Sarcasm aside, you may be right.

But Apple will be selling the premium product and collecting 75% of the profits. Just like:
Mac
iPhone
iPod
iTV (whoops. 2013 slipped in there)

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post #18 of 132
"despite tripling Kindle sales during the holiday season"

"the company is losing anywhere from $5 to $10 on each Fire it sells"

So not really despite, more like because of.
post #19 of 132
Quote:
Originally Posted by jmgregory1 View Post

Or they'll have to start charging more for them, taking away the only "real" advantage they have over the iPad. My guess is that they are not going to see the revenue stream from Fire users that they've built this model on. It's just not a sustainable model, unless they can get enough book sales and proprietary app sales to cover the cost - and I'd hate to be an Amazon accountant trying to determine how and where they're accounting for any recoup in cost.

As a fork, when you do a product search, the Fire does not use Google but goes through Amazon's search catalog first. You can get everything from RAM chips, resistors, monitors, books, generators and cars through Amazon. This does two things:

1) It substantially lowers Amazon's bill they get from Google every month.

2) It targets more sales of all retail items to Amazon and their affiliates.
post #20 of 132
Quote:
Originally Posted by kresh View Post

Why? The Kindle Fire is not what compressed margins this quarter. Amazon's margins have been suppressed for the past few quarters due to the huge spending on physical warehouse construction, cloud infrastructure build-out, video on demand build-out, and feature discounts. Amazon continued this trend with $500 billion USD in infrastructure expenditures.

What came out of the blue was Amazon's buy back of 1.6 million shares of stock at over $600 million USD. It has been a while since they bought back stock. Net income would have been over $750 million USD instead of the $177 million USD without the buyback.

I am glad to see the investments to improve their physical and financial positions.

This was hardly a miss. Amazon managed a $0.38 per share earnings, crushing the street's estimste of $0.17.

The investments in physical plants/warehouses is a CAPEX expense (cash flow) and does not hit the income statement. Only depreciation impacts earnings. And, Amazon is going to have A LOT of depreciation hitting its books in the near future

Stock buybacks also do not hit the income statement. They are a use of cash funds and hit Cash Flows (under Investing Activities)

Last, $.38 per share per quarter would generate a 130 PE ratio over the course of a year @ the current $195 stock price (an expansion of the 102 they are at today). A PE of 130 vs. Apple's PE of 13

Amazon has to become 10X more profitable just to justify their current market cap. Yeah, good luck with that

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post #21 of 132
Quote:
Originally Posted by JONOROM View Post

Sarcasm aside, you may be right.

But Apple will be selling the premium product and collecting 75% of the profits. Just like:
Mac
iPhone
iPod
iTV (whoops. 2013 slipped in there)

For smartphones it is Apple/Samsung
For tablets it is Apple/Amazon

so:
Phones: iOS/Android
Tablets: iOS/Androidish
post #22 of 132
"Amazon has to become 10X more profitable just to justify their current market cap. Yeah, good luck with that"

The disparity in PE makes no sense at all, and suggests both that AMZN is still hugely overvalued, and AAPL hugely undervalued. At least AAPL is finally moving slowly northwards - and will soon be worth the combined value of MSFT and GOOG. Perhaps not so long after that it will also encompass AMZN... Some might see such comparisons as having novelty value only - but of the four companies, only AAPL has a long-term solid business strategy, and the other three have been very short-term, with a very strong component of just reacting to what has become the AAPL behemoth. Worse, it's hard to see any hint of a change... the real investment opportunities are now AAPL... and some much smaller innovative companies completely outside AAPL's orbit.
post #23 of 132
http://parislemon.com/

Apple made almost as much money every single DAY last quarter, as Amazon made the entire quarter.
(average of $146M/day vs $177M/quarter)

Damn.
post #24 of 132
Quote:
Originally Posted by Red Oak View Post

I can't wait for the impact when Apple brings down the hammer and prices the iPad 2 @ $399

Question. How many more iPad 2's will Apple ship at $399 vs $499. How about at $99? How about if they were $0.99?

hint: its a trick question.
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post #25 of 132
Quote:
Originally Posted by island hermit View Post

Actually, this shows that Apple now has real competition and will soon be in second place for tablet sales. By this time next year Samsung and Amazon will be selling 3 tablets for every one that Apple sells.

</slappy>

Perhaps we should add an emoticon to the forum to better express this sentiment and to be added to the end of posts instead of a common closing tag.



That one, maybe?

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already fucked.

 

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Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already fucked.

 

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post #26 of 132
Quote:
Originally Posted by Red Oak View Post


Last, why do they continue to hide Kindle sales? If I was long, I would be pretty upset that they are hiding the economics and performance of a product that is fundamental to the prospects of the company. It's bizarre

I can't wait for the impact when Apple brings down the hammer and prices the iPad 2 @ $399

I think they are hiding Kindle sales because they are not selling as many as the estimates that are out there. This article mentioned an estimate of 6 million Kindle Fire sales. At $200 each, that is $1.2 billion. The ereader Kindles I would estimate at 1 million at $100 each on average would add another $100 million in revenue. So, a total of $1.3 billion in Kindle revenue.

Total revenue was $17.43 billion. So, 7.5% of total revenue was Kindle sales? I find that hard to believe. Amazon sells lots of other stuff.

If my numbers are off, then feel free to provide your estimates.
post #27 of 132
Quote:
Originally Posted by sflocal View Post

You guys have zero ability of running a company.

What Amazon loses per unit, they make up for it in volume.

</sarcasm>

Sorry... it was a sad attempt to imitate Slapppy.

post #28 of 132
Quote:
Originally Posted by sflocal View Post

You guys have zero ability of running a company.

What Amazon loses per unit, they make up for it in volume.

</sarcasm>

Sorry... it was a sad attempt to imitate Slapppy.

It's a sketchy business model for sure. It seems to me that with this move - selling tablets at a loss - Amazon has handed Apple control of the market. If Apple drop their content prices to cost they will still make shed loads of money. To match the prices Amazon will make nada and will have to raise the price of the hardware. A surefire loose loose for Amazon.
post #29 of 132
Quote:
Originally Posted by Slurpy View Post

http://parislemon.com/

Apple made almost as much money every single DAY last quarter, as Amazon made the entire quarter.
(average of $146M/day vs $177M/quarter)

Damn.

Dont confuse revenue with profit. If you turn the statement into a profit comparison then lets compare low long it would take Apple to lose as much money as Amazon lost last quarter?
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post #30 of 132
Quote:
Originally Posted by paxman View Post

It's a sketchy business model for sure. It seems to me that with this move - selling tablets at a loss - Amazon has handed Apple control of the market. If Apple drop their content prices to cost they will still make shed loads of money. To match the prices Amazon will make nada and will have to raise the price of the hardware. A surefire loose loose for Amazon.

Similar business model as Game consoles. How did Nintendo do this last quarter? How about Microsoft on original XBox. The thing is, I don't think Amazon has the same deep pockets as Microsoft.
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post #31 of 132
Quote:
Originally Posted by AppleGreen View Post

I think they are hiding Kindle sales because they are not selling as many as the estimates that are out there. This article mentioned an estimate of 6 million Kindle Fire sales. At $200 each, that is $1.2 billion. The ereader Kindles I would estimate at 1 million at $100 each on average would add another $100 million in revenue. So, a total of $1.3 billion in Kindle revenue.

Total revenue was $17.43 billion. So, 7.5% of total revenue was Kindle sales? I find that hard to believe. Amazon sells lots of other stuff.

If my numbers are off, then feel free to provide your estimates.

You raise interesting points.

Firstly, they said "millions" not "tens of millions". Secondly, they won't disclose the numbers. Thirdly, they make a loss on each unit.

So while clearly Amazon is gaining traction on the "lower-end" tablet scene, it sounds like internally they might be trying to figure out how to turn this thing around to be profitable in and of itself in the long run. If they sell 20 million tomorrow that's a $20 million to $500 million *loss* so no doubt they're cautious themselves.
post #32 of 132
Quote:
Originally Posted by island hermit View Post

Was that sarcasm?

I've been trying to find a positive spin on the net about Amazon's quarter but the closest I've found is a headline from CNN stating that Amazon's earnings are OK... other than that the news is negative.

According to a PC Mag article, video customers doubled over one year and app customers tripled from 3rd quarter to 4th quarter. Whatever they are doing, its starting to work. Amazon is in this game for the long run. Eventually the revenue and profit from incremental Fire based sales will show up.
post #33 of 132
Quote:
Originally Posted by kresh View Post

Amazon continued this trend with $500 billion USD in infrastructure expenditures.

Wow. You could buy a war in Iraq (maybe 2) for that kinda money.
post #34 of 132
Quote:
Originally Posted by snova View Post

Similar business model as Game consoles. How did Nintendo do this last quarter? How about Microsoft on original XBox. The think is, I don't think Amazon has the same deep pockets as Microsoft.

Well PS3 has some good points but they are living off exclusives and titles for Japan and Japanophiles. F***ing latest Miyazaki game is a PS3 exclusive. Pisses me off, having got an Xbox360 because it's slimmer and has IMO better graphics compared to the circa PC 2002 visuals of the PS3.

The game console business model is certainly fragile. Again that's why Amazon is cautious. They need to turn this thing around somehow or fall into the trap of razor-thin hardware margins to push other stuff. It's just a risky, risky move in today's market.

Nintendo, I think their IP published for all platforms... iOS, Android, consoles, PC, Mac would probably do multiples better than exclusives on their hardware.
post #35 of 132
Quote:
Originally Posted by anantksundaram View Post

Some of us predicted this (and take no joy in it).

This is just getting started. They'll probably have to pull or scale back Fire at some point.

Losing money is part of the plan. Now it all makes sense. That's why Apple has a P/E of 13 and Amazon has a P/E of 100+. You have to lose money to make money and that's Apple's problem. They're not losing enough money to make a lot more money. Why didn't I think of that before. Apple's business model is all wrong and that's why Apple's valuation is all out of whack. A company needs plenty of debt and low margins to become a Wall Street model like Amazon. It's that razor-edge that investors like to see before investing in a company. Apple has too, too much cash. It needs to throw all that away and start from scratch to become like a startup company with a startup valuation.
post #36 of 132
Quote:
Originally Posted by snova View Post

Similar business model as Game consoles. How did Nintendo do this last quarter? How about Microsoft on original XBox. The thing is, I don't think Amazon has the same deep pockets as Microsoft.

Warren Buffett has assured Amazon investors that he will keep the company afloat as long as it takes to become bigger than Apple, so he can retire as rich man. He likes Jeff Bezos strategy. He likes it a lot. In a week, you won't even remember that Amazon's share price is down today because the Oracle of Omaha has vowed to pour back money into Amazon and keep the P/E well above 105 because he sees a younger version of himself in Jeff Bezos. Both are wild and crazy guys that enjoy wagering investors' cash with a turn of the wheel. Screw today because tomorrow we're gonna be rich, I mean, richer.
post #37 of 132
Well seeing as Amazon's guidance was for a loss I think a profit is good.

I do think Apple has proved at this stage that being a loss leader is not the best strategy. They should have sold the Fire for $229 and everyone who was buying one still would have and they would have turned a profit on them. It's simple math. Besides, people respect a company when they are upfront about these things.

The PS3 started off at a loss, but it was also $600, so there was plenty of room to go down and still have room for decent profit. At $199 how low can you go? The Kindle fire is the real big iPod touch, in the lamest of senses. It's also one that won't fit in your pocket. When the iPad was rumoured I banged on and on and on about it having a 10" screen. 10.1" was my guess. People round here were mostly guessing 7". My point of view was always that if you can't fit it in your pocket then make it as big as possible within reason. That size is around 10", and that fact isn't going to change. Just you wait for the Kindle thunder with its 10" screen.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #38 of 132
Yes, enjoy your moment of levity at my expense. Look carefully at these statements from Amazon. By the end of 2012, Amazon will surpass Apple iPad easily. Remember, thats just one company. There are many, many more Android powered Tablets coming in 2012. So, enjoy, revel, celebrate at my expense. By years end, most of you will be questioning why Apple has again failed and relegated back to a small minuscule market share.

http://www.pcmag.com/article2/0,2817,2399674,00.asp

Kindle Fire, App Store Give Amazon Holiday Cheer

"Amazon reported a 177 percent increase in the number of Kindles sold during the holidays, adding that the Kindle Fire was the top-selling product across its entire product line."

"Amazon weighed its Kindle sales in the context of the nine-week holiday period ending December 31, 2011, or the beginning of November. The Kindle was also the top-selling product on Amazon.it and Amazon.es, as well as Amazon.co.uk, Amazon.de and Amazon.fr."

"The number of videos purchased or rented from Amazon Instant Video and the number of Amazon Instant Video customers both more than doubled year-over-year in the fourth quarter. In addition, the number of Prime Instant Video streams increased nearly 300 percent in the fourth quarter compared to the third quarter, Amazon said."

"Amazon Appstore for Android customers nearly tripled in the fourth quarter compared to the third quarter, the company said. In addition, customers downloaded more apps from the Amazon Appstore during the fourth quarter than they had during all previous quarters combined, it said."
post #39 of 132
Quote:
Originally Posted by kresh View Post

Why? The Kindle Fire is not what compressed margins this quarter. Amazon's margins have been suppressed for the past few quarters due to the huge spending on physical warehouse construction, cloud infrastructure build-out, video on demand build-out, and feature discounts. Amazon continued this trend with $500 billion USD in infrastructure expenditures.

What came out of the blue was Amazon's buy back of 1.6 million shares of stock at over $600 million USD. It has been a while since they bought back stock. Net income would have been over $750 million USD instead of the $177 million USD without the buyback.

I am glad to see the investments to improve their physical and financial positions.

This was hardly a miss. Amazon managed a $0.38 per share earnings, crushing the street's estimste of $0.17.

Nice to see your reading comprehension and financial acumen on display, slappy jr!
post #40 of 132
Quote:
Originally Posted by Slurpy View Post

http://parislemon.com/

Apple made almost as much money every single DAY last quarter, as Amazon made the entire quarter.
(average of $146M/day vs $177M/quarter)

Damn.

Very nice observation!
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