Amazon’s Q3 Results Fall Short of Analyst Expectations

Amazon’s revenue in the third quarter narrowly missed analyst projections, and its losses were wider than expected.

The online retailer’s net loss totaled $274 million, or 60 cents a share, on sales of $13.81 billion. Those numbers fall below analyst estimates and are at the midpoint of the ranges Amazon was projecting.

Wall Street expectations for the quarter were a net loss of eight cents a share on revenue of $13.9 billion. Amazon’s own forecast consisted of sales between $12.9 billion and $14.3 billion, representing growth between 19 percent and 31 percent compared with the year-ago period. It also expected an operating loss between $350 million and $50 million, down from operating income of $79 million a year ago.

The third quarter 2012 includes a loss of $169 million, or 37 cents a share, related to its stake in LivingSocial, the Groupon competitor. AllThingsD obtained the memo that LivingSocial’s CEO Tim O’Shaughnessy sent to employees today that explained the whole backstory.

In the company’s earnings press release, Amazon’s CEO and founder Jeff Bezos defended the company’s decision to keep margins thin, which is something investors and analysts always struggle to value. “Our approach is to work hard to charge less. Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point,” Bezos said.

Although Amazon never discloses exactly how many devices it is selling (another point of contention), he provided vague results, like these: The recently announced Fire HD is the company’s best-selling product, and the next two bestselling products worldwide are the Kindle Paperwhite and the $69 Kindle.

“We’re selling more of each of these devices than the No. 4 bestselling product, book three of the ‘Fifty Shades of Grey’ series,” Bezos said.

Amazon provided guidance for the fourth quarter, which is typically the busiest time of the year for all retailers. It’s projecting a wide range of income, which could consist of a profit or loss:

  • Net sales are expected to fall between $20.25 billion and $22.75 billion, growing between 16 percent and 31 percent compared with fourth quarter 2011.
  • Operating income is expected to range between a loss of $490 million and a gain of $310 million; Amazon had a $260 million operating income in the fourth quarter 2011.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work