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Amazon Reports Lower 1Q Earnings, Higher Revenue

Fri, 04/26/2013 - 10:24am
Barbara Ortutay, AP Technology Writer

NEW YORK (AP) — Amazon.com Inc.'s net income declined in the first three months of the year even though revenue increased 22 percent, as the online retailer continued to spend heavily on order fulfillment and rights to digital content.

The world's largest online retailer, which also sells the Kindle devices and services, said Thursday that it earned $82 million, or 18 cents per share, in the first quarter. That's down 37 percent from $130 million, or 28 cents per share, in the same period a year earlier. But it's higher than the 7 cents expected by analysts polled by FactSet.

Revenue rose 22 percent to $16.07 billion, from $13.19 billion. Analysts expected $16.14 billion.

Amazon's operating expenses rose 22 percent to $15.9 billion, from $13 billion. The company has been investing a lot of its income in enhancing its distribution network, its shopping website and its Kindle business as part of a long-term growth plan. Because of that, and deep discounts it offers customers, Amazon's profit margins have been thin.

For the current quarter, Amazon expects revenue of $14.5 billion to $16.2 billion. The midpoint of the range is lower than the $15.92 billion that analysts had expected, but the company typically gives a conservative forecast.

Baird analyst Colin Sebastian said that a measure called paid unit growth — 30 percent — was a bit slower than expected. This figure refers to the physical and digital goods that Amazon and its third-party sellers sell on its sites worldwide, excluding returns and cancellations.

Currency fluctuations, especially a weak yen, are also weighing on Amazon's results, as has been the case for other technology companies. A weak yen translates to fewer dollars on sales in Japan. Excluding the effects of currency rate changes, revenue would have increased 24 percent rather than 22 percent in the first quarter.

Amazon is stretching well beyond online retailing. The Seattle-based company soon plans to debut original TV programming. Amazon is running introductory pilots for 14 TV shows on its website for anyone in the U.S., U.K. and Germany to watch. Viewers will get to help decide which shows get additional episodes.

"The pilots are out in the open where everyone can have a say," Jeff Bezos, Amazon's founder and CEO, said in a statement. "I have my personal picks and so do members of the Amazon Studios team, but the exciting thing about our approach is that our opinions don't matter. Our customers will determine what goes into full-season production."

Amazon's stock slid $6, or 2.2 percent, to $268.70 in extended trading after the results came out. The stock had closed up $5.92, or 2.2 percent, at $274.70.

 

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