Amazon.com Third-Quarter Profit Falls, Stock Drops

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NEW YORK - Amazon.com said Tuesday it is gearing up for strong device sales this holiday season, driven by its new Kindle Fire tablet.

But the e-tailer reported a sharp decline in third-quarter profitability and also predicted a bottom line drop for the current quarter amid continued spending.

"Sept. 28 was the biggest order day ever for Kindle, even bigger than previous holiday peak days - we introduced Kindle Fire for $199, Kindle Touch 3G for $149, Kindle Touch for $99, and our all new Kindle for only $79," said Jeff Bezos, founder and CEO of Amazon.com, in a statement. "In the three weeks since launch, orders for electronic ink Kindles are double the previous launch. And based on what we're seeing with Kindle Fire pre-orders, we're increasing capacity and building millions more than we'd already planned."

Amazon unveiled the Kindle Fire, which will be a key competitor for Apple's iPad when it goes on sale in mid-November, late last month. As always, Amazon didn't detail how many Kindles it sold in its latest quarter.

On a conference call Tuesday afternoon, Amazon CFO Tom Szkutak wouldn't say if the Kindle Fire’s browser would include a direct search function for Amazon products, but confirmed that it would include links to Amazon.

Amazon reported third-quarter earnings of $63 million, down 73 percent from the year-ago period and below Wall Street expectations, despite a 44 percent revenue increase to $10.9 billion. Szkutak mentioned spending on more shipping centers and other infrastructure to deal with higher demand as a reason for the different directions of revenue and profitability.

For the current fourth quarter, Amazon said its profit will again decline. Its bottom line could range from an operating loss of $200 million to an operating profit of $250 million, the firm said. In after-hours, the stock declined more than 10 percent.

With Netflix bringing its streaming service to the U.K., one analyst asked Tuesday whether Amazon-controlled U.K. online video service Lovefilm would continue to spend on content. "We have been investing in content since the acquisition," said Szkutak. "We continue to invest there. It's a great oppportunity. The business is doing very well."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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