Amazon’s Q3 call: selling more, earning less
This is the way Amazon wants it right now. Sales are up hugely, like the second year of a start-up. In this
Amazon says net sales were up 44%: $10.88 billion in the third quarter, compared with $7.56 billion in third quarter 2010.
That’s a huge increase!
During the same, period, though, net income decreased 73% to $63 million.
Right now, Amazon is doing what it is famous for doing…buying marketshare.
In this case, they are spending a lot of money creating marketshare. They aren’t buying it from somebody else…they are making markets. I think the Kindle Fire will create a new segment of the market…not take existing share from Apple, for example.
Naturally, a lot of antsy investors won’t get this strategy…and we’ll probably see a stock drop initially. As I look at it right now at
the stock went down 4.4% today. Wednesday update: it dropped another 12%.
Don’t worry about that…I could be totally wrong, of course, but I think that will bounce back quickly. What’s good for the stockholders isn’t always what’s good for us as Kindleers anyway.
There are two things that particularly stood out to me in the press release.
One was Jeff Bezos being quoted as saying that they are increasing Kindle Fire availability by millions of units. It sounds like they may not run out, as they’ve done with reflective screen Kindles. That may be because the ability to mass produce backlit devices may be easier to ramp up after all these years than reflective screens.
The other one is that they really featured Amazon Publishing in the press release. I’ve written about that quite a bit: people need to start thinking about Amazon as a major US publisher…
During the Q&A (Question & Answer) part of the conference call, which is archived at
they made several references to “lifetime value” of a Kindle. That’s value to them: they included content (the books and such you buy), but also things like ad revenue on the Special Offers models. As they point out, profit both from content and from advertising trail the purchase of the device. You buy the device, then you buy the content. Amazon continues to be paid by the advertisers for hypothetically years after you’ve bought your Kindle with Special Offers.
Feel free to let me know what you think…is Amazon investing too much? Will the stock recover tomorrow? Have they drilled “premium products at non-premium prices” into your head yet? ;)
Update: Interesting chart comparing Amazon’s sales to their operating income:
This post by Bufo Calvin originally appeared in the I Love My Kindle blog.