Amazon earnings miss Street estimates, Kindle sales nearly triple

Posted:
in General Discussion edited January 2014


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.





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Comments

  • Reply 1 of 131
    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.
  • Reply 2 of 131
    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.
  • Reply 3 of 131
    jonoromjonorom Posts: 293member
    Amazon is down 8.25% so far after hours.
  • Reply 4 of 131
    aaarrrggghaaarrrgggh Posts: 1,580member
    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.
  • Reply 5 of 131
    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.
  • Reply 6 of 131
    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.
  • Reply 7 of 131
    aaarrrggghaaarrrgggh Posts: 1,580member
    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...
  • Reply 8 of 131
    aaarrrggghaaarrrgggh Posts: 1,580member
    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...
  • Reply 9 of 131
    mac voyermac voyer Posts: 1,283member
    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.
  • Reply 10 of 131
    sflocalsflocal Posts: 4,652member
    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.
  • Reply 11 of 131
    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.
  • Reply 12 of 131
    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.
  • Reply 13 of 131
    kreshkresh Posts: 379member
    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.
  • Reply 14 of 131
    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>
  • Reply 15 of 131
    red oakred oak Posts: 668member
    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
  • Reply 16 of 131
    jonoromjonorom Posts: 293member
    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)
  • Reply 17 of 131
    "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.
  • Reply 18 of 131
    steven n.steven n. Posts: 1,120member
    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.
  • Reply 19 of 131
    red oakred oak Posts: 668member
    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
  • Reply 20 of 131
    steven n.steven n. Posts: 1,120member
    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
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