Amazon: Big Kindle sales, but sales and outlook fall short

Amazon: Big Kindle sales, but sales and outlook fall short

Summary: Amazon's fourth quarter sales and outlook fall short of expectations. Kindle sales surge.

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Amazon's fourth quarter sales missed projections, but earnings were ahead. The big wild card was Kindle device sales, which tripled over the holidays.

The e-commerce giant reported earnings of $177 million in the fourth quarter, or 38 cents a share, on revenue of $17.43 billion, up 35 percent from a year ago. Wall Street was expecting earnings of 17 cents a share on revenue of $18.25 billion.

Also: Amazon's Q4: The Kindle Fire effect vs. more investment

How was Wall Street so mixed up? First, the Kindle Fire went on sale and analysts weren't sure what to expect in terms of margins.

Meanwhile, the outlook for the first quarter fell short of expectations. Amazon projected first quarter sales between $12 billion and $13.4 billion with a wide profit and loss range. Amazon projected an operating loss $200 million to a profit $100 million.

For 2011, Amazon reported earnings of $631 million, or $2.17 a share, on revenue of $48.98 billion, up 41 percent from a year ago. Just like the fourth quarter results, Amazon's revenue growth was strong, but earnings fell dramatically from a year ago.

On a conference call with analysts, Amazon CFO Tom Szkutak:

Our Q4 2011 capital expenditures were $550 million. The increase in capital expenditures reflect additional investments in support of continued business growth including investments in technology, infrastructure including Amazon Web services and additional capacity to support our fulfillment operations.

In a statement, Amazon CEO Jeff Bezos said "millions of customers" bought the Kindle Fire and other e-readers. As per Amazon custom, no hard numbers were disclosed.

The afterhours action looked like this:

By the numbers:

  • Product sales in the fourth quarter were $15.31 billion. Services sales were $2.12 billion.
  • Technology and content expenses in the fourth quarter were $862 million, up from $519 million a year ago.
  • North American sales were $9.9 billion in the fourth quarter with international revenue of $7.53 billion.

Topics: Mobility, Amazon, Banking, Enterprise Software, Hardware

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19 comments
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  • RE: Amazon: Big Kindle sales, but sales and outlook fall short

    Deleted
    mike.celone@...
  • "Revenue Falls By 58%"

    That's all you need to know. Bezos is a Bozo! He has about as much chance of becoming the next Steve Jobs as an orangutan in the zoo :)
    orandy
    • Amazon has been in trouble before

      @orandy ... might be overvalued right now but they've got a strong company and brand. Who knew those Kindle's would take off?
      HollywoodDog
    • RE: Amazon: Big Kindle sales, but sales and outlook fall short

      @orandy

      To be fair, Amazon has long term strategies. It's worked out so far. That being said, I think it is odd to have a strategy that is supposed to appeal to people not willing the spend money(Kindle Fire) and hope that they spend more money later to make up the difference.
      dhmccoy
      • RE: Amazon: Big Kindle sales, but sales and outlook fall short

        @dhmccoy Not really. I'm wary to pick up even a Kindle Fire because of the price, then I open up my Amazon order history and see a few thousand dollars in junk I've order the past few months that I've been nickel and dimed out of.

        They're trying to sell low cost products, like eBooks.
        Aerowind
  • RE: Amazon: Big Kindle sales, but sales and outlook fall short

    I think of it as an investment in the Kindle Future... They give away a lot of stuff for Android but, think about this... Most of the Fires purchased were for Christmas and those devices wouldn't generate Prime Subscriptions until January 25th at the earliest so I think we'll see a better Q1/12 than Q4/11 was in the Kindle arena.<br><br>If even a third of the Fires sold generate a prime Subscription you could be looking at 200 Million in additional revenue. This doesn't account for movie rentals or purchases... It also doesn't account for books, music or app purchases.<br><br>Bottom Line, we knew the Fire was being sold at a loss so, it isn't unreasonable to expect the real numbers to start showing up in Q1/12.
    slickjim
    • RE: Amazon: Big Kindle sales, but sales and outlook fall short

      @Peter Perry - Then why is Amazon's guidance for 1Q12 lower than analysts expected?
      rbgaynor
      • RE: Amazon: Big Kindle sales, but sales and outlook fall short

        @rbgaynor Everybody sets lower marks for the months following Christmas as you likely have 2 Months of down sales and then the 3rd Month the Taxes start getting spent.
        slickjim
    • 200,000 million is 200 billion! you sure about that?

      @Peter Perry <br><br>"If even a third of the Fires sold generate a prime Subscription you could be looking at 200,000 Million in additional revenue." eh.. they just had revenue for the (christmas!) quarter at 17 billion. those prime subs are going to increase revenues 10 times!?<br><br>5 million Primes subs at 79 each = 395 million i.e less than 1 billion<br>buddy I think you are somewhat short there... <br>???
      Davewrite
      • RE: Amazon: Big Kindle sales, but sales and outlook fall short

        @Davewrite oops, I put too many zeros in... I meant 200 Million.
        slickjim
    • Check your numbers

      @Peter Perry Amazon has NEVER claimed that they sold 1M Kindle Fire. They are always VERY CAREFUL not to use the word Fire when they talk about numbers.<br><br>In fact, Quanta Comp ... manufacturer of the Fire only has a 200K production request. If the Fire is still available, that means that Amazon sold less than 200K .... because that is all they ordered.<br><br>How much you want to bet that the great majority of the numbers claimed are of the $79 B&W Kindle?
      wackoae
      • RE: Amazon: Big Kindle sales, but sales and outlook fall short

        @wackoae that was supposed to be 11 Million but you're right... they never claimed that and channel partners are reporting receiving 6 Million from recent reports with estimates of 4 Million Sold... of course I would assume Amazon probably sold a couple Million themselves... my estimates were based on 6 Million.
        slickjim
    • 200,000 million in additional revenue for Prime?

      @Peter Perry

      Are you working in South Korean Won? And given Amazon's revenue projection (by Amazon) is being driven lower for next quarter...
      Bruizer
      • RE: Amazon: Big Kindle sales, but sales and outlook fall short

        @Bruizer No, I just spaced and started writing 200 Million in numbers then half way through lost it and wrote Million... I meant 200 Million...

        Either, I think The Fire is the start of a good product line for Amazon and can only grow from here.
        slickjim
  • bought a kindle

    I bought a Kindle for my wife, awesome device, does everything I would ever do with an Ipad for 1/3 the cost. Someone finally gets it with these devices, its about consumption, not productivity and the price makes sense for that. If I'm going to spend $600+ I'll buy a laptop and have full functionality and applications. Rediculous to try to convert an Ipad into a laptop with keyboard etc.
    mterry@...
    • RE: Amazon: Big Kindle sales, but sales and outlook fall short

      @mterry@... Just because you can't see what it can do doesn't mean it can't. My wife has an iPad and a Fire, they both have their place in her daily activities. The Fire is almost exclusively used for reading but the iPad more for productive tasks. She also has a laptop so is not trying to convert it into a laptop mainly because that is not what is designed for. Of course the laptop pretty much collects dust now though.
      non-biased
  • So I don't get it...

    Selling at a loss to make money on content sales? Apple sells at a profit and it sells content at a profit. So which plan sounds better? Does Amazon make more per content sale than Apple or is it the same or roughly the same?

    Pagan jim
    James Quinn
    • RE: Amazon: Big Kindle sales, but sales and outlook fall short

      @James Quinn
      It also is about possibility of Apple excluding more and more competition from iOS.

      Amazon will not exclude itself from Kindle Fire.

      And I agree we put tooooo much emphasis on Fire. Heck even ZDNet Ebooks & EReaders sections do not give much care about EInk versions of Kindle. All talk about Fire....
      przemoli
  • Beware holiday sales figures for new products

    There can be blind enthusiasm for new, flashy products. Once people have this new technology in hand, they quickly come to realize its realities - and will suffer "buyer's remorse" and never buy that product again if they find it crippled relative to better market offerings. The real test for Fire will be in later quarters, to see how many people buy again, or whether those who have not yet bought are warned off by regretters. And very much keep in mind the holiday factor: Many holiday purchases are "gifts", which are defined as things that people didn't ask for and may not have wanted. (And, as Saturday Night Live famously said, "The Kindle Fire will be a big hit among parents who always buy the wrong thing.")
    Quidproquorum