Amazon Q2 sales surge 51pc to US$9.9bn, profits down

27 Jul 2011

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E-commerce giant Amazon has reported revenues of US$9.91bn for the second quarter. However, profits were down 8pc to US$191m and the company says it expects this decline to continue in the third quarter.

Operating income was US$201m in the second quarter, compared with US$270m in second quarter 2010. The favourable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was US$28m.

Amazon appears to be investing heavily in areas such as cloud, web services and media, or as analysts put it, sacrificing short-term profitability for long-term growth.

CEO Jeff Bezos was nonetheless upbeat, expounding the success of its Kindle e-book reader family. There was no mention yet of a forthcoming Amazon Android tablet believed to be debuting in October.

He said sales growth of Kindle devices accelerated in second quarter 2011 compared to first quarter 2011.

“Low prices, expanding selection, fast delivery and innovation are driving the fastest growth we’ve seen in over a decade,” Bezos said.

“Kindle 3G with Special Offers has quickly become our best-selling Kindle at only US$139. Customers love the convenience of a 3G reader – no hunting for or paying for Wi-Fi hotspots. Amazon picks up the tab for the 3G wireless, so you have no monthly payments or annual contracts.”

North America segment sales, representing the company’s US and Canadian sites, were US$5.41bn, up 51pc from second quarter 2010.

International segment sales, representing the Company’s UK, German, Japanese, French, Chinese and Italian sites, were US$4.51bn, up 51pc from second quarter 2010. Excluding the favourable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 36pc.

Worldwide Media sales grew 27pc to US$3.66bn. Worldwide Electronics and Other General Merchandise sales grew 69pc to US$5.89bn.

Looking ahead to the third quarter, net sales are expected to be between US$10.3bn and US$11.1bn, or to grow between 36pc and 47pc compared with third quarter 2010. Operating income is expected to be between US$20m and US$170m, or between 93pc decline and 37pc decline compared with third quarter 2010.

Amazon, an expanding digital media and cloud giant

During the quarter, Amazon.com announced the launch of Kindle Textbook Rental, offering students savings of up to 80pc off textbook list prices. The US Kindle Store now has more than 950,000 books, including new releases and 110 of 111 New York Times best-sellers. More than 800,000 of these books are US$9.99 or less, including 65 New York Times best-sellers. Millions of free, out-of-copyright, pre-1923 books are also available to read on Kindle.

Amazon.com launched MyHabit.com, a membership-only fashion destination offering up to 60pc off list prices of designer and boutique brands in women’s, men’s and children’s departments.

During the quarter, Amazon announced that customers will be able to stream TV shows from CBS’ vast library. Amazon Prime customers will be able to instantly watch thousands of episodes from the CBS library at no additional cost to their memberships. With the deal, Amazon will add 2,000 episodes to grow the total number of Prime instant videos to more than 8,000 movies and TV shows.

The company announced three enhancements to Amazon Cloud Drive and Cloud Player: storage plans that include unlimited space for music, free storage for all Amazon MP3 purchases and Cloud Player for Web, now on iPad.

Amazon Web Services (AWS) and SAP announced that AWS has been certified as a global technology partner of SAP. AWS announced the availability of Amazon Relational Database Service (RDS) for Oracle databases, allowing customers to easily set up, operate and scale fully managed Oracle databases in the cloud. AWS lowered prices for the 15th time in four years by eliminating inbound internet data transfer costs and reducing outbound data transfer costs.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com