Thursday, January 31, 2013

Amazon's Slim Profit Gets Smaller Still; Bezos Confirms eBooks A "Multi-Billion Dollar Category"

Amazon reported fourth quarter sales after the close of the market on Tuesday, coming in at the low end of their own sales projections. That means that sales of $21.27 billion, up 22 percent, also fell $1 billion short of analysts' expectations. The company did show some net income--but it was a slim $97 million or 21 cents per share, again short of investors' expectations. (Net income is also much lower than the same quarter a year ago, when they earned $177 million.) But operating income rose--at $405 million, 55 percent better than a year ago, and better than the forecast that scared investors three months.

So in a market where Amazon has been trading at all-time highs and investors want to believe, shares rose more than 6 percent in early trading Wednesday, more than gaining back what they had lost the day before. For those who don't want to believe, Amazon's total sales for the quarter were about the same as Apple's gross margin for the same period, $21.06 billion (which yielded operating income of $17.62 billion). In   a similar vein, analyst Benedict Evans noted in a tweet that excluding charges, since its birth Amazon has had cumulative sales of $245.5 billion, yielding net income of $1.9 billion (or less than eight-tenths of one percent).

In Amazon's release, ceo Jeff Bezos spoke directly to their book business: "After 5 years, ebooks is a multi-billion dollar category for us and growing fast – up approximately 70 percent last year. In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a bookseller, up just 5 percent." The latter statistic has already been misconstrued in some places--their print book sales continue to grow, and have grown continuously since the company was founded. Which means, effectively, they continue to take print book market share from other sellers of books. Their competitors, and the trade, would be celebrating if other major vendors announced that print book sales were up 5 percent in the biggest quarter of the year. (Separately, the company reports that 23 KDP authors each sold over 250,000 copies of their books in 2012.)

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