RealTime IT News

Amazon's E-book Sales Up but Profits Down

Online retailer Amazon posted higher-than expected sales for its first fiscal quarter of 2011 and, despite surprising employment growth during the quarter coupled with lower than expected profits, investors appeared to be satisfied overall.

Amazon (NASDAQ: AMZN) reported net sales of $9.86 billion for its first fiscal quarter of 2011, which closed March 31 -- up 38 percent from $7.13 billion in the comparable quarter of 2010. If favorable gains from changes in international exchange rates are excluded, that growth came in at 36 percent, according to Amazon statements.

However, overall net income for the quarter slipped by 33 percent over the same period last year -- down to $201 million or $0.44 diluted earnings per share (EPS), from $299 million or $0.66 EPS in the year earlier period.

In the final quarter of 2010, by contrast, the online retail giant brought in net sales of $12.95 billion, up 36 percent from the year-earlier period, though not surprising due to the strong holiday sales quarter.

Meanwhile, Amazon's operating income for the quarter fell to $322 million, from $394 million for the year ago quarter.

Company officials said that part of the strength of the first quarter's sales came from a new, low-cost Kindle electronic reader introduced during the quarter and strong sales of its reader content.

"In the last 90 days, we announced Kindle with special offers, Kindle Library Lending, and Audible audiobooks on Kindle," Jeff Bezos, Amazon's founder and CEO, said in a statement.

Among that content, Amazon's U.S. Kindle Store now stocks in excess of 900,000 books, which includes both new releases and "107 of 110 New York Times bestsellers."

Helping to pull down Amazon's profits, however, has been a hiring spree that the company has been on recently. In just the last quarter alone, Bezos and company grew the workforce by more than 4,000 employees, bringing its overall employment to nearly 40,000.

As far as the current quarter, Amazon officials predicted net sales of between $8.85 billion and $9.65 billion -- that would constitute growth of between 35 percent and 47 percent compared with last year's second quarter.

A major outage on part of Amazon Web Services (AWS), the company's cloud computing platform, in April, came too late to have any impact on the quarter's performance.

Investors appeared to have taken the company's numbers in stride. In mid-day trading Wednesday, Amazon's stock was trading near its 52-week high at around $192.8, up approximately $10.60, or 5.8 percent.

Stuart J. Johnston is a contributing editor at InternetNews.com, the news service of Internet.com, the network for technology professionals. Follow him on Twitter @stuartj1000.