The shares are down 13% at open trading at $40.20
Amazon Profit Drops; Shares Decline ( AP Online )
SEATTLE, Oct 26, 2005 (AP Online via COMTEX) – Amazon.com Inc.'s quarterly
income dropped 44 percent from a year ago as the Internet retailer paid to
settle a patent lawsuit. The company saw its shares tumble afer startling Wall
Street with a soft sales outlook for the holiday shopping season.
For the quarter ending Dec. 31, Amazon is projecting sales of $2.86 billion to
$3.16 billion. The mean estimate, $3.01 billion, falls below the average Wall
Street estimate of $3.08 billion in revenue at a time when Americans
traditionally flood stores for Christmas gift buying. Of 13 analysts polled by
Thomson Financial, the lowest estimate was for fourth-quarter sales of $2.91
billion.
In a report after the markets closed Tuesday, the Seattle-based company said its
net income was $30 million, or 7 cents a share, for the three months ended Sept.
30, down from $54 million, or 13 cents a share, a year earlier.
The income slump came despite a rise in revenue. The company said net sales
increased to $1.86 billion in the third quarter, up 27 percent from $1.46
billion last year.
Excluding an unanticipated one-time $40 million legal charge, Amazon said its
net income would have been $50 million, or 12 cents per share. Analysts polled
by Thomson had expected 10 cents per share on revenue of $1.84 billion.
Amazon shares fell 7.5 percent, or $3.46, to $42.71 in the extended session.
In August, Amazon announced it would pay $40 million to Soverain Software LLC to
settle a patent-infringement lawsuit. Chicago-based Soverain had alleged that
Amazon’s Web site infringed several Soverain patents on network sales systems
and Internet server access control and monitoring systems.
Sales in the United States and Canada jumped to $1.04 billion, up 28 percent
from $816 million in the same period last year. International sales rose to $817
million, up 26 percent from third quarter 2004 sales of $647 million.
Electronics and general merchandise sales were brisk, growing 43 percent
worldwide to $491 million, up from $344 million last year.
Books, music and other products in the media category still make up the bulk of
the company’s revenue. Media sales rose 20 percent to $1.31 billion, up from
$1.09 billion last year.
Amazon said it sold more than 1.6 million copies of the latest Harry Potter
edition, making it the company’s biggest new product release.
For the full year, Amazon is predicting sales of $8.37 billion to $8.67 billion.
The company did not offer any guidance for fiscal 2006, but said it plans to
spend more money hiring software engineers and on other technology development
costs.
“This is something that keeps increasing,” Piper Jaffray analyst Safa Rashtchy
said, noting that the company’s technology and content expenses are approaching
6 percent of total revenue - nearly three times what it spent a few years ago.
In a conference call with analysts, Jeff Bezos, Amazon’s founder and CEO, and
Tom Szkutak, chief financial officer, said the company believes its growing
investment in technology will ultimately improve shareholder returns - even
though it will likely take time for it to pay off.
Bezos and Szkutak said they remain pleased with Amazon Prime, a $79-a-year
service that gives people unlimited two-day shipping. “Customers like it. The
prime members that are subscribers are buying more, they’re doing more
cross-shopping,” Szkutak said, especially in electronics, tools, kitchen
supplies and health and personal care products.
The company did not disclose how many customers have signed up for it or how
much money Amazon Prime has brought in since it debuted in February.
Amazon.com started out as a virtual book store 10 years ago, and is now the
world’s largest online retailer, selling everything from brake repair tools to
belly rings.