Amazon: Kindle Fire nuked our Q4 outlook

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.

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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.

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Topic: Amazon

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17 comments
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  • You have to spend money to make money

    I still havent purchased any tablet device but maybe I will bite on Kindle Fire. We'll see how it all pans out...but the reality is, if you want a tablet, you have to go with Apple.

    The "open source" Android/Linux were slow to arrive and failed to impress.
    otaddy
    • People forgetting that this tablet can only run Froyo apps

      @otaddy.. there's very little in terms of tablet optimized honeycomb apps but basically no 2.x tablet optimize apps.. this tablet runs stretched phone apps.. this thing is literally just an Amazon media consuming color e-reader that runs phone apps.. $200 is actually on the expensive side for that.. I already have a phone an even consuming media on a 7 inch device is not really ideal..
      doctorSpoc
      • RE: Amazon: Kindle Fire nuked our Q4 outlook

        @doctorSpoc

        Gong, completely wrong. 7" is perfect for reading a novel - your slab of glass 1.5 lb tablets are simply too heavy to read a novel for an hour or two at a time, they have to be placed on the table and used like netbooks.

        Now your phone may be light enough but scrolling the internet or reading a text book on a phone is a joke.

        7" is the sweet spot for reading and for surfing the internet.

        As far as apps go, the phone apps are all you need. 7" is not large enough to add a ton of widgets. one platform for apps, that run on both tablet and phone - is fine for smaller tablets. If you have a really large tablet, then you'd demand specially designed tablet apps. at 7" - no point.
        rdupuy11
    • RE: Amazon: Kindle Fire nuked our Q4 outlook

      @otaddy I have the color Nook, ereader/tablet. It is good for ebooks, browsing and email. If that is your objective, the kindle fire should be fine also. I am not big on video or music and haven't even tried them on the Nook. The Kindle Fire is more designed at least for the video, so it should be okay there too.
      hayneiii@...
    • RE: Amazon: Kindle Fire nuked our Q4 outlook

      @otaddy
      Though kindle is primarily a E-reader not a tablet. Kindle Fire is aiming to be the e-reader that's also a tablet. Ipad is a tablet that has apps that alow you to e-read.

      Different marketing strategies are needed for kindle fire than ipad.

      Kindle fire will always be an e-reader first and a tablet second. Core kindle users will like color graphics but will miss being able to read the kindle fire in sunlight, something their old kindle did perfectly.

      Amazon Kindle fire will sell ok at first but eventually kindle users will stick to the original kindle e-reader.
      Bakabaka
  • gotta be kidding

    so that's the last game plan of the ipad wannabe competitors: taking a huge hit on every unit sold and making it up in volume!
    bannedfromzdnetagainandagain
    • RE: Amazon: Kindle Fire nuked our Q4 outlook

      @bannedfromzdnetagainandagain Weird to believe that Amazon's tablet is a'wannabe' ipad - if you'd read anything, you'd be half aware that it is anything but that. And Amazon's business model has ALWAYS been utterly different from Apple's; it isn't just volume that Amazon seeks (though, of course, that will happen), but tying in customers. Every Amazon tab user who increases their spend with Amazon is likely to pay for devices many times over - and still get value for money with every purchase. Fine to be an ipad fanboy, but you really need to keep up with the real world too ;o)
      Heenan73
      • unlikely

        @Heenan73 <br>amazon hopes customers will spend a lot of money on digital media from amazon stores on the device. but digital media is a tiny margin business. heck, even the biggest digital media store on this planet (itunes) barely runs at break even. there is no way amazon will be able to recoup their hardware losses on each unit with profits from digital media sales. remember, we are talking about profit from media sales to make up for the device subsidy, not revenue.
        bannedfromzdnetagainandagain
    • RE: Amazon: Kindle Fire nuked our Q4 outlook

      @bannedfromzdnetagainandagain The ipad wasn't anywhere near the first tablet, id say more the most successful tablet.

      I suppose 'Successful' is what everyone wants to achieve.
      Frenz9
    • RE: Amazon: Kindle Fire nuked our Q4 outlook

      @bannedfromzdnetagainandagain I wish you get banned from zdnet forever
      browser.
      • i know, i know

        @browser.
        the obvious, the truth - it hurts.
        bannedfromzdnetagainandagain
      • Then, he'll change the user id to &quot;bannedfromzdnetforever&quot;

        and YOU will be back at square one.
        adornoe
    • RE: Amazon: Kindle Fire nuked our Q4 outlook

      @bannedfromzdnetagainandagain No, they make it up on sales of ebooks and videos.
      hayneiii@...
  • RE: Amazon: Kindle Fire nuked our Q4 outlook

    Not sure why all these companies feel the need to jump off these various financial cliffs to get a tablet - any tablet! - to market, despite the losses.
    pdq
    • I would agree... with most companies

      @pdq

      But this is Amazon and it's not about getting just any old tablet to market, it's about getting Amazons tablet in the hands of Amazons customers. There is a difference, Amazon already has a workable business model for selling devices near or at cost and recouping those costs in future media sales. Amazons devices are, quite literally, Amazons store-front.
      oncall
  • RE: Amazon: Kindle Fire nuked our Q4 outlook

    http://proxy4biz.com/
    weibb
  • RE: Amazon: Kindle Fire nuked our Q4 outlook

    I would never buy a tablet. However, I was considering buying the Amazon Kindle if the price went down. Well, the price of this Kindle Fire is down to where I am willing to buy it. I think I will go get one now.
    sgtm8@...