Amazon earnings: Shares tumble as holiday sales fall short

Amazon, a bellweather of the online retail market, reported a holiday quarter profit that exceeded Wall Street's estimates but fell short in revenue, a surprise that sent shares tumbling in after-hours trading.

For the fourth quarter, the company reported net income of $416 million, or 91 cents per share, an increase from the 85 cents reported for the same quarter a year earlier. Wall Street had been expecting 88 cents. Sales were up 36 percent from last year, coming in at $12.95 billion, but missed analysts' estimate of $13 billion. (Statement, Techmeme)

For the year, the company reported net income of $1.15 billion, or $2.53 per share, or sales of $34.2 billion, a 40 percent jump over 2009. In a statement, founder and CEO Jeff Bezos said:

Thanks to our customers, we achieved two big milestones. We had our first $10 billion quarter, and after selling millions of third-generation Kindles with the new Pearl e-ink display during the quarter, Kindle books have now overtaken paperback books as the most popular format on Amazon.com.

Among the quarter's highlights:

• Fourth quarter sales in the U.S. and Canada were up 45 percent from a year earlier. International sales grew 26 percent.
• Worldwide Media sales were up 12 percent. Worldwide Electronics and Other General Merchandise sales were up 60 percent.
• The company said it sold "millions" of third-generation Kindle devices with tyhe new Pearl e-ink display and that sales of the device eclipsed sales of "Harry Potter and the Deathly Hallows" as the best-selling product in the company's history. Once again, Amazon did not release actual sales figures for the product.
• Amazon launched a Kindle App for Windows Phone 7, adding to its lineup of apps that allow the reading of Kindle publications on multiple devices.
• The Price Check for iPhone app, which allows shoppers to instantly comparison shop a product by scanning a barcode, snapping a picture or even speaking the product name into the device. It was used millions of times over the holiday season, the company said.
• Amazon Web Services achieved Level 1 Payment Card Industry (PCI) compliance, which allows merchants and other service providers to run their applications on AWS PCI-compliant technology infrastructure to store, process and transmit credit card information in the cloud.

On a call with analysts today, company execs went out of their way to avoid tipping their hats on any details around Kindle sales. Clearly, it's a big seller and a big deal for the company - especially now that Kindle books have overtaken paperback books as the more popular format.

During the Q&A, the subject of Kindle came up and the responses were free of any real substance.

• "We're extremely pleased with what we're seeing. We sold millions of devices in Q4." Right, we knew that already. It was in the release.
• "Kindle book sales are growing at a faster rate than paperbooks." Already knew that, too.
• "With the opportunity we see there, we'll continue to invest in that business." Well, I probably could have guessed that.

Looking ahead, the company projected first quarter revenue to be between $9.1 billion and $9.9 billion, up 28 percent to 39 percent over last year's first quarter. Wall Street had forecast sales of $9.4 billion for the quarter.

Shares of Amazon were up more than 5 percent in regular trading, closing at $184.45. But the gains were lost and shares continued to decline in after-hours trading, down nearly 10 percent.