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Amazon owns up to extra spending on Fire Phone, Web Services

One analyst went so far as to demand which numbers on the balance sheet Amazon values most and when said numbers will improve.
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Written by Rachel King, Contributor on
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Following the release of a much weaker-than-expected Q3 report, Amazon CFO Tom Szkutak fielded pointed questions from analysts and shareholders during the quarterly conference call on Thursday.

One analyst went so far as to demand which numbers on the balance sheet Amazon values most and when said numbers will improve.

Szkutak declined to respond directly to many of these questions, deflecting requests for forecasts beyond quarterly guidance.

Yet he did acknowledge some of the problem points for the Kindle maker during the quarter.

For instance, the Fire Phone probably has some investors boiling now given that the smartphone turned out to be a bit of a dud — to the point where the Seattle-based company slashed the price tag to just 99 cents.

Turns out that the disappointing mobile device cost Amazon approximately $170 million in inventory and supplier expenses amid weak sales.

Amazon Web Services also contributed to an expensive spending tab over the three-month period. (Although, falling within the "Other" category of Amazon's product portfolio, AWS and company grow sales domestically, both sequentially and annually.)

Szkutak noted that the CapEx increase, rounding out to $4.63 billion in Q3, reflected "additional investments in support of continued business growth due to investments in technology infrastructure, including Amazon Web Services and additional capacity to support our fulfillment operations."

Szkutak elaborated ever-so-slightly during the Q&A portion of the call:

In terms of AWS, we saw a very good growth in Q3 as well as from a usage standpoint. It's very similar to Q2, close to 90 percent, and so the teams doing just a fantastic job. You can see our other revenue in North America went up a little bit sequentially, and AWS is certainly the largest piece of that. It's the vast majority of it, and they're growing at a faster rate than that other line item so again the team is doing a fantastic job — not only serving customers but launching many, many new features and services. You can see some of the detail in that, in the highlight section of our release today, so we're very excited about it.

In terms of devices, I can't speculate what we would do going forward. But we just launched a number of new tablets and E-readers that we're excited about, and there's some really great price points for customers on the tablet side. We also launched a kids tablet, which is first time we've launched. We launched new Kindles, including our premium Kindle, and it's a terrific product. We think it's the best Kindle we've made to date for sure, and so we're very excited about that and we're excited to have these offerings for customers.

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