Bucking Recession, Amazon Profits Jump 24%
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Amazon continues to buck the recessionary trend, today reporting first-quarter profits and revenues well above analysts' expectations.
The e-commerce giant posted net income of $177 million, or 41 cents a share, a 24 percent increase from the same period last year.
Analysts polled by Thomson Reuters were looking for Amazon (NASDAQ: AMZN) to post earnings of 31 cents per share in the recession-dampened first quarter.
Amazon reported total sales of $4.89 billion, up 18 percent from the first quarter in 2008. Analysts were projecting sales of $4.755 billion.
As stout as Amazon's performance was in an economy flush with weak corporate earnings, CEO Jeff Bezos said his company still has a long way to go in improving operating efficiencies.
"This is very encouraging for me -- very energizing for me -- that everywhere we look ... we find that we are doing every operation we that do in sub-optimal ways," Bezos said on a conference call with analysts.
"We've gotten better every year, but we still have a lot of progress that we can make, and that's encouraging," he added.
With worldwide sales of 2.7 billion in the quarter, Amazon's media division, which includes sales of books and DVDs, is its largest segment. But the segment dubbed "electronics and general merchandise" is the fastest growing, with sales increasing 38 percent from last year to just over $2 billion, indicating Amazon's increasing competition with retailers like Wal-Mart and Best Buy.
Amazon's third business segment, dubbed simply "other," includes its Web services business, where the company offers computing services like storage, hosting and on-demand processing power. Web services remain a sideshow for Amazon, however, with sales of just $120 million, about 2.5 percent of the company's total revenue.
Amazon CFO Tom Szkutak said that several large enterprises have signed up to use its Elastic Cloud Computing (EC2) service, including Autodesk, ESPN and Eli Lily, which is using the computing service to support drug trials. Szkutak also said that many hedge funds are running on EC2, as well as several other large firms that prefer to remain unnamed owing to competitive concerns.
Amazon, which has weathered the economic downturn far better than its competitors, put a scare into investors in late March when news surfaced that Amazon would be closing three distribution centers, though one analyst attributed the closures to improved efficiency, rather than a sign of dwindling demand.
Amazon's biggest news in the first quarter was the hotly-anticipated release of the Kindle 2, the second iteration of its popular e-reading device.
Amazon does not provide sales figures for the Kindle, saying only that sales of the device had proved a pleasant surprise.
"We're grateful and excited that Kindle sales have exceeded our most optimistic expectations," Amazon CEO Jeff Bezos said in a statement.
In March, the company rolled out an application to bring Kindle titles to Apple's iPhone and iPod touch.
Asked about the prospect of transforming the Kindle into a device with more computing functions than simply downloading and reading books and periodicals, Bezos declined to comment on future plans, but reiterated his commitment to the singular purpose of the e-reader.
"We think reading is an important enough activity that it seserves a purpose-built device," he said.
Looking ahead to the second quarter, Amazon is projecting net sales to check in between $4.3 billion and $4.75 billion, for a growth rate of between 6 percent and 17 percent from the year-earlier period.
Update adds comments from conference call with analysts.