Amazon: Kindle Fire nuked our Q4 outlook

Summary:The Kindle Fire tablet is expected to be a big hit, but it might not pay off for Amazon as quickly as one might expect.

Amazon's highly-anticipated Kindle Fire is expected to launch a new spectrum of low-cost yet feature-rich tablets when it launches in November.

However, the Seattle-based corporation's investment in the development and promotion of the Android-powered tablet, along with the rest of the new models in the Kindle line, have seriously downgraded Amazon's outlook for the fourth quarter.

See also: Amazon's third quarter misses mark; Outlook sluggish

For reference, Amazon is predicting revenue between $16.45 billion and $18.65 billion, whereas Wall Street is looking for revenue of at least $18.15 billion.

Amazon chief financial officer Tom Szkutak acknowledged during a conference call with investors on Tuesday that there are "certainly things that are impacting investments in other areas," which are affecting Q4 guidance:

Our results are inherently unpredictable and may be materially affected by many factors, including a high level of uncertainty surrounding exchange-rate fluctuation, as well as the global economy and consumer spending. It's not possible to accurately predict demand, and therefore our actual results could differ materially from our guidance. As we described in more detail on our public filings, issues such as settling intercompany balances in foreign currencies amongst our subsidiaries, unfavorable resolution of legal matters, and changes to our effective tax rates can all have a material effect on guidance.

Szkutak danced around the culprit a bit, but the Kindle Fire, priced at $199, is definitely deterring higher earnings estimates. Szkutak also touted the long-term plan for the Kindle Fire, describing it as a "premium device," and that Amazon takes all of the economics of the Kindle business into account, ranging from the lifetime value to the content available on the tablets and e-readers.

Amazon is ramping up production due to high demand, which will be great for Amazon in the long run. Nevertheless, it is also probably what killed earnings for Q3 and will likely have some residual effects in Q4.

Related:

Topics: Amazon

About

Rachel King is a staff writer for CBS Interactive based in San Francisco, covering business and enterprise technology for ZDNet, CNET and SmartPlanet. She has previously worked for The Business Insider, FastCompany.com, CNN's San Francisco bureau and the U.S. Department of State. Rachel has also written for MainStreet.com, Irish Americ... Full Bio

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