John Paczkowski

Recent Posts by John Paczkowski

Amazon: Crash Proof?

Back in December, Amazon CEO Jeff Bezos claimed that the 2008 holiday season would be the company’s best yet, but he offered nothing in the way of data to back it up. Well, here’s the proof.

The online retailer reported a nice gain in earnings for the fourth quarter thanks to strong sales during the holiday shopping season. For the period ended Dec. 31, Amazon (AMZN) reported earnings of $225 million, or 52 cents a share, compared to earnings of $207 million, or 48 cents a share, for the same period the previous year. Revenue grew 18 percent to $6.7 billion. The Street had been expecting earnings of 40 cents a share on revenue of $6.48 billion. “We remain relentlessly focused on serving customers with low prices, great selection and free shipping offers, including Amazon Prime,” Bezos said in a statement. “We’re particularly grateful for the unusually strong demand for Kindle in the fourth quarter.”

The full earnings release below. But first a few highlights:

  • No mention of Kindle sales or the 8-K in the release that I can find. Only the announcement that selection increased by 45,000 titles in the fourth quarter to 230,000 titles
  • 3.6 percent operating margin. Very, very tight
  • Better-than-expected forecast for Q1. Looking ahead, Amazon expects revenue to come in between $4.53 billion and $4.93 billion. Analysts were predicting $4.54 billion
  • AMZN trading up nearly 10 14 percent on the news

Amazon.com Announces Fourth Quarter Sales up 18% to $6.70 Billion; 2008 Free Cash Flow Grows 16% to $1.36 Billion

SEATTLE–(BUSINESS WIRE)– Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its fourth quarter ended December 31, 2008.

Operating cash flow was $1.70 billion in 2008, compared with $1.41 billion in 2007. Free cash flow increased 16% to $1.36 billion in 2008, compared with $1.18 billion in 2007.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 446 million on December 31, 2008, compared with 435 million a year ago.

Net sales increased 18% to $6.70 billion in the fourth quarter, compared with $5.67 billion in fourth quarter 2007. Excluding the $320 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 24% compared with fourth quarter 2007.

Operating income was $272 million in the fourth quarter, compared with $271 million in fourth quarter 2007. Excluding the $26 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income would have grown 10% compared with fourth quarter 2007.

Net income increased 9% to $225 million in the fourth quarter, or $0.52 per diluted share, compared with net income of $207 million, or $0.48 per diluted share, in fourth quarter 2007.

“We remain relentlessly focused on serving customers with low prices, great selection and free shipping offers, including Amazon Prime,” said Jeff Bezos, founder and CEO of Amazon.com. “We’re particularly grateful for the unusually strong demand for Kindle in the fourth quarter.”

Full Year 2008

Net sales increased 29% to $19.17 billion, or 28% excluding the $127 million favorable impact from year-over-year changes in foreign exchange rates throughout the year, compared with $14.84 billion in 2007.

Operating income increased 28% to $842 million, or 27% excluding the $10 million favorable impact from year-over-year changes in foreign exchange rates throughout the year, compared with $655 million in 2007. Included in 2008 operating income is a $53 million non-cash gain recognized on the sale of the Company’s European DVD rental assets.

Net income increased 36% to $645 million in 2008, or $1.49 per diluted share, compared with net income of $476 million, or $1.12 per diluted share, in 2007.

Highlights

North America segment sales, representing the Company’s U.S. and Canadian sites, were $3.63 billion, up 18% from fourth quarter 2007.

International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $3.07 billion, up 19% from fourth quarter 2007. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 31%.

Worldwide Media sales grew 9% to $3.64 billion, compared with $3.33 billion in fourth quarter 2007.
Worldwide Electronics & Other General Merchandise sales grew 31% to $2.89 billion, compared with $2.21 billion in fourth quarter 2007, and increased to 43% of worldwide net sales compared with 39%.

Amazon.com introduced Frustration-Free Packaging, a multi-year initiative designed to make it easier for consumers to liberate items from their packaging by eliminating hard plastic clamshell cases, plastic bindings and plastic-coated wire ties. Frustration-Free Packaging is also more environmentally friendly than traditional packaging. The program launched with products from leading manufacturers including Fisher-Price, Mattel, Microsoft and Transcend.

Amazon.com shipped over 3 million units worldwide in fourth quarter 2008 on behalf of sellers who utilized Fulfillment by Amazon.

Amazon.co.uk launched the Amazon MP3 music service, offering more than 4 million DRM-free songs from all four major and hundreds of independent labels that can be played on any MP3 player.
Amazon Web Services (AWS) launched Amazon CloudFront, a self-service, pay-as-you-go web service for content delivery enabling global content distribution and seamless integration with Amazon S3.

AWS launched the ability to run Microsoft Windows Server on Amazon Elastic Compute Cloud (Amazon EC2) and enabled customers to run their Amazon EC2 instances in two Availability Zones within a new European Region with full-service features like Elastic IP addresses and Amazon Elastic Block Store.

AWS introduced tiered pricing for Amazon S3, enabling customers’ costs to decrease as their storage volume grows.

The Kindle Store contains the largest collection of e-books available anywhere in the world. Selection increased by 45,000 titles in the fourth quarter, bringing the total to 230,000 titles. One hundred three out of 112 current New York Times bestsellers are available and, along with most new releases, are priced at $9.99 or less. In addition, the Kindle Store recently added The Arizona Republic, The Baltimore Sun, The Orange County Register and USA Today and now offers newspapers from 8 of the top 10 metro areas in the United States.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of January 29, 2009. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce and the various factors detailed below.

First Quarter 2009 Guidance

Net sales are expected to be between $4.525 billion and $4.925 billion, or to grow between 9% and 19% compared with first quarter 2008.

Operating income is expected to be between $125 million and $210 million, or between 37% decline and 6% growth compared with first quarter 2008. This guidance includes approximately $75 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.


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