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Amazon Tops Expectations on Soaring Sales

Online retail powerhouse Amazon (NASDAQ: AMZN) posted a strong first quarter of earnings today, propelled by impressive sales growth in the electronics and general merchandise segment.

For the quarter ending March 31, Amazon reported $4.13 billion in net revenue, toward the high end of its own guidance and ahead of analysts' consensus of $4.08 billion. Quarterly revenue was a 37 percent jump from the same period a year ago.

With net income rising 30 percent over the first quarter of 2007, Amazon banked earnings of 34 cents per share, also bearing analysts' consensus of 32 cents, according to Thomson Reuters.

"Our sales growth this quarter was driven by low prices and millions of in-stock items available for immediate shipment," Amazon CEO Jeff Bezos said in a statement.

At $2.13 billion, North American sales were up 31 percent from last year's Q1, while international sales jumped 44 percent to $2.01 billion.

Global sales of electronics and general merchandise spiked 56 percent from last year to $1.48 billion, while global sales in the media category were up 28 percent to $2.54 billion.

Nevertheless, investors punished the e-commerce stalwart in after-hours trading for lowering its operating income projection. Now offering guidance of $740 million to $940 million for the year, Amazon undercut its previous projection by $45 million on both ends. Shares fell more than 4 percent after the closing bell, after ending up 1.76 percent for the day.

Mum on forays into digital media

Company executives gave few hints about one closely watched aspect of the company's business is faring: the digital portion of its media segment.

"It's very, very early, but we're pleased with the traction," CFO Thomas Szkutak said during the company's earnings call. "Apologies for not breaking it out in more detail than that."

The lack of visibility continues Amazon's famously cagey stance on offering precise figures about its digital sales, even as the company is increasingly trying to diversify its retail offerings in the area -- which now includes e-books, music downloads and other business lines.

In January, Amazon announced that it was purchasing Audible, an online audiobook retailer for about $300 million. The deal closed in March.

Amazon continues to add titles to its Kindle e-book reader as well, though the company has had trouble keeping inventory in stock.

Szkutak added that Amazon has been working very hard to right the supply shortages, and he hopes the issue has been resolved.

"Just in the last few days, the Kindle has been where we want it, which is in stock," he told analysts during today's call.

Also in this quarter, Amazon has continued building out its online music store. The company signed a licensing agreement with Sony BMG -- the remaining holdout among the four top record labels -- to offer its catalog to Amazon MP3 without digital rights management (DRM) usage restrictions.

Moves by the record labels to cozy up to Amazon has been widely seen as a ploy to break Apple's vice grip on the digital music industry. While Apple's iTunes grows unchecked, having overtaken Wal-Mart as the nation's leading music retailer -- online or off -- there are some encouraging signs for Amazon.

With Apple atop research firm NPD Group's ranking of music sellers for February, Amazon was tied for fourth with Target. But NPD suggested that there's room for the entire digital music market to grow, so luring customers away from iTunes is not Amazon's only path to success.

"The fact that Amazon's early growth does not appear to be at the expense of Apple iTunes is a healthy indication that the digital music customer pool can expand into new consumer groups who have not yet joined the iTunes community," said Russ Crupnick, entertainment industry analyst for NPD.

Amazon also touted the growth of its Web Services business, with the signature Elastic Cloud Computing (EC2) hosting service and its S3 cloud storage offerings. This quarter, Amazon added elastic IP addresses to its EC2 product to improve fault resiliency.

More than 35,000 developers signed on to Amazon Web Services in the quarter, bringing the total number of registrations to more than 370,000.