AllThingsD » AMZN

Spare Change for Amazon Shares?

John Paczkowski — Fri, 23 Oct 2009 21:59:38 +0000

$118.49. That’s the price at which Amazon shares closed Friday, a day after the company reported a 69 percent jump in third-quarter profit and a 28 percent gain in revenue. It was a new 52-week high and the stock’s best since December 1999, when it hit $106.68.

Which is saying something. Because as you might recall, in 1999, Nasdaq was soaring on the back of the dot-com bubble to levels never before seen.

And here we are amid the worst recession since the 1930s. Haven’t even entered that “all important holiday shopping season” yet, either.

Things are looking pretty good for Amazon (AMZN) right now. Sure, there’s renewed competition from retailers like Wal-Mart (WMT). There are potential sales tax issues and income tax liabilities and a raft of Kindle-killers headed to market. But Amazon’s stock is up 131 percent this year, brokerage firms are upgrading their ratings on the company, and analysts are saying it’s only going to go higher.

Said Citigroup analyst Mark Mahaney: “Near-term outlook very positive as AMZN heads into holiday season fully armed against shrinking/de-stocking offline retailers, with one of the must-have gadgets of the season (Kindle), a significantly strengthening International presence, and soon-to-be closed Zappos acquisition.”

Yeah. Things are looking pretty good right now. But we said that back in ’99 too–when Amazon had a similar P/E.

Amazon's Blowout Q3

John Paczkowski — Thu, 22 Oct 2009 20:04:19 +0000

According to comScore (SCOR), U.S. Web traffic to Amazon in the most recent quarter rose 14.8 percent, far outstripping that of overall U.S. Internet traffic, which grew just 3.5 percent.

“It appears that Amazon is gaining share the old-fashioned way,” ThinkEquity analyst Ed Weller noted last week, “by acquiring more and more customers…and selling more to each of them.” And judging from the nice gain in third-quarter earnings the company posted after Thursday’s closing bell, that would seem to be the case.

Net income for the period surged 69 percent thanks to a strong increase in sales. Analysts had been looking for earnings of 33 cents a share on revenue of $5.02 billion for the quarter. Amazon (AMZN) reported 45 cents a share, compared with 27 cents a share for the same period the previous year. Revenue rose 28 percent to $5.45 billion.

Once again, it seems Amazon has not broken out Kindle sales numbers in its report, though CEO Jeff Bezos did stress them in an earnings release. Said Bezos: “Kindle has become the #1 bestselling item by both unit sales and dollars–not just in our electronics store but across all product categories on Amazon.com. It’s also the most wished for and the most gifted. We are grateful for and energized by this customer response.”

Looking ahead to the key fourth quarter, Amazon is calling for revenue in the range of $8.125 billion to $9.125 billion. Analysts have been forecasting revenue of $8.13 billion. Given that the upcoming quarter includes the annual holiday shopping binge, Amazon may be looking at another blowout quarter.

Shares in the company are spiking on the news, up over nine percent to $101.90 as I write this.

Amazon's Blowout Q3

John Paczkowski — Thu, 22 Oct 2009 20:04:19 +0000

According to comScore (SCOR), U.S. Web traffic to Amazon in the most recent quarter rose 14.8 percent, far outstripping that of overall U.S. Internet traffic, which grew just 3.5 percent.

Shares in the company are spiking on the news, up over nine percent to $101.90 as I write this.

Windows 7 to Harry Potter: Expelliarmus

John Paczkowski — Wed, 21 Oct 2009 17:01:58 +0000

Here’s an interesting Windows 7 stat as we near the operating system’s official release: It’s Amazon (AMZN) U.K.’s biggest pre-ordered product of all time. In fact, the online retailer has received more pre-orders for Windows 7 than it did for J.K. Rowling’s final “Harry Potter” book.

“The launch of Windows 7 has exceeded everyone’s expectations, storming ahead of Harry Potter and the Deathly Hallows as the biggest grossing pre-order product of all time at Amazon.co.uk,” Amazon’s Brian McBride told the Telegraph. “Demand is still going strong. Over the past three months, only Dan Brown’s The Lost Symbol has sold more copies than Windows 7, which is an incredible achievement for a software product.”

And an incredible achievement for Microsoft (MSFT), especially after that monument to disappointment, Windows Vista. Seems those early discounts and launch parties paid off. Well, maybe not the launch parties.

Open Book Alliance Throws Book at Google

John Paczkowski — Wed, 26 Aug 2009 20:07:32 +0000

The Open Book Alliance–or “Sour Grapes Alliance,” as Google likes to call it–formally launched Wednesday afternoon, debuting a new Web site, as well as the manifesto with which it is challenging Google’s settlement with authors and publishers.

“The mass digitization of books promises to bring tremendous value to consumers, libraries, scholars, and students,” the Alliance says in its mission statement. “The Open Book Alliance will work to advance and protect this promise. And, by protecting it, we will assert that any mass book digitization and publishing effort be open and competitive. The process of achieving this promise must be undertaken in the open, grounded in sound public policy and mindful of the need to promote long-term benefits for consumers rather than isolated commercial interests. The Open Book Alliance will counter Google, the Association of American Publishers and the Authors’ Guild’s scheme to monopolize the access, distribution and pricing of the largest digital database of books in the world. To this end, we will promote fair and flexible solutions aimed at achieving a more robust and open system.”

Rallying behind that cry is an array of nonprofit author groups, library institutions, and Google (GOOG) rivals that includes the American Society of Journalists and Authors, the New York Library Association, Microsoft (MSFT), Yahoo (YHOO) and Amazon (AMZN), which only confirmed its membership in the Alliance today. All of these participants fear that the Google Book Search Settlement, which will restore access to millions of out-of-print books, could one day give the company a monopoly on the largest digital library in the world.

With a Sept. 4 deadline for submissions to the court reviewing the settlement approaching, we’re likely to hear increasingly more cries that the settlement is bad for consumers, libraries, schools, authors and publishers.

Internet Archive Announces Everybody-Against-Google Coalition

John Paczkowski — Fri, 21 Aug 2009 11:30:36 +0000

As the Google Book Search Settlement nears a Sept. 4 deadline for rights-holders to opt out of the deal, some powerful interests are allying to oppose it.

Rallied by the Internet Archive and veteran Silicon Valley antitrust lawyer Gary Reback, Amazon (AMZN), Microsoft (MSFT), Yahoo (YHOO), the Special Libraries Association, the New York Library Association and the American Society of Journalists and Authors are forming a coalition called the Open Book Alliance. Its purpose: To make the case to an already concerned Justice Department that the $125 million settlement–which will allow Google to digitize some 18 million books–is an anticompetitive restructuring of the book industry and one that could give Google a monopoly on the largest digital library of books in the world.

And it might. There are some who claim the plan grants Google (GOOG) a blanket license on millions of so-called orphan books, works still in copyright but whose copyright owners are unknown.

But Google insists the deal is nonexclusive and says other companies are free to pursue their own agreements with the publishing industry. The company further notes that its efforts will not only restore access to some 10 million out-of-print books that are still under copyright, but provide their authors with a new means of profiting from them. The deal is beneficial, Google contends, to consumers and to the publishing industry.

And to Google as well, because there is always a profit motive to the company’s altruism.

That said, Google does have a point here. Restoring access to millions of books that are today unavailable in any medium is a worthy goal. So is enabling their authors and publishers to once again make a bit of money from them. Is there a better option for the publishing industry at this moment? Allow those works to lie fallow and unmonetized?

[Image Credit: Forrester Magazine]

Kindle Ate My Homework

John Paczkowski — Thu, 30 Jul 2009 23:17:14 +0000

Amazon CEO Jeff Bezos’s hair-shirt apology for Kindlegate was a nice gesture, but it didn’t go over particularly well with Justin Gawronski, a Michigan high school senior who lost his homework when the retailer remotely deleted a copy of George Orwell’s “Nineteen Eighty-Four” from his Kindle earlier this month. He’s filed a class action suit against Amazon seeking money for those who lost work due to the book deletion and an injunction barring the company from improperly deleting books from Kindles again.

Below, an excerpt from the suit and the document in full:

On or about early-June, 2009, Mr. Gawronski purchased for $0.99 an electronic copy of George Orwell’s “1984″ for use on his Kindle 2 from Amazon’s Kindle Store. He purchased the book because it was assigned to him as a summer homework assignment by a teacher at his high school.

On or about July 20, 2009, after reading online about Amazon’s practice of remotely deleting copies of “1984″ from Kindles, Mr. Gawronski powered on his Kindle 2 only to watch “1984″ vanish before his very eyes. Because “1984″ was the most recent book he had been reading on his Kindle 2 prior to July 20, 2009, the Kindle 2 powered on to the last page of “1984″ Mr. Gawronski had been reading. Within moments of powering on his Kindle 2 to this page of “1984,” the entire e-book disappeared as Amazon immediately remotely deleted it from his Kindle 2.

Mr. Gawronksi did not consent to Amazon remotely deleting “1984″ from his Kindle 2.

As part of his studies of “1984,” Mr. Gawronski had made copious notes in the book. After Amazon remotely deleted “1984,” those notes were rendered useless because they no longer referenced the relevant parts of the book. The notes are still accessible on the Kindle 2 device in a file separate from the deleted book, but are of no value. For example, a note such as “remember this paragraph for your thesis” is useless if it does not actually a reference a specific paragraph. By deleting “1984″ from Mr. Gawronski’s Kindle 2, this is the position in which Amazon left him. Mr. Gawronski now needs to recreate all of his studies.

Amazon_Complaint

Feedback for eBay: Lousy Seller. Would Not Buy From Again.

John Paczkowski — Wed, 22 Jul 2009 21:37:59 +0000

If eBay shares were to be listed among the company’s other auctions, buyer feedback would more likely be negative than not. Hurt by the souring economy and increased competition, eBay reported its third consecutive earnings decline Wednesday.

Net income in eBay’s second quarter, ended June 30, fell 29 percent to $327 million, or 25 cents a share, from $460 million, or 35 cents a share from a year earlier. Revenue fell four percent to $2.1 billion.

The results came in at the high end of the Q2 outlook eBay provided back in April when the company said it expected revenue of between $1.85 billion and $2.05 billion and earnings per share of between 23 cents and 26 cents.

“We drove solid second quarter results, with strong momentum and market share gains at PayPal and continued stabilization in our core eBay business,” eBay CEO John Donahoe in a statement. “I’m pleased with our pace, our progress and our performance.”

Can’t be much pleased with the company’s core online-auction business, though. That continues to show weakness. The amount of goods and services flowing through eBay’s (EBAY) marketplace, called “gross merchandise volume,” fell 10 percent year-over-year to $11.1 billion. And that’s not good. Especially when Amazon.com (AMZN) is gaining market share so quickly.

“The core eBay marketplaces business continues to be the most important driver for eBay’s share price,” Heath Terry of FBR Capital Markets said in a note to clients this week. “While the company is making progress, management still has a long way to go in addressing the years of technological neglect at the company.”

Earth's Biggest Shoe Store?

John Paczkowski — Wed, 22 Jul 2009 20:40:47 +0000

Well, this is unexpected. Amazon has agreed to purchase online shoe retailer Zappos.com in a deal valued at about $850 million.

Under the terms of the deal, the retailer will acquire all outstanding Zappos shares in exchange for roughly 10 million shares of Amazon common stock, valued at about $807 million, and some $40 million in cash and restricted stock. Amazon (AMZN) says the deal should be completed by fall.

“This morning, our board approved and we signed what’s known as a ‘definitive agreement,’ in which all of the existing shareholders and investors of Zappos (there are over 100) will be exchanging their Zappos stock for Amazon stock,” Zappos CEO Tony Hsieh said in a post to the company blog. “Once the exchange is done, Amazon will become the only shareholder of Zappos stock….

“We think that there is a huge opportunity for us to really accelerate the growth of the Zappos brand and culture,” Hsieh continued, “and we believe that Amazon is the best partner to help us get there faster. Amazon supports us in continuing to grow our vision as an independent entity, under the Zappos brand and with our unique culture.”

“Zappos is a customer focused company,” said Amazon CEO Jeff Bezos in a statement. “We see great opportunities for both companies to learn from each other and create even better experiences for our customers.”

If the shoe fits, right?

Below, Bezos announces the acquisition in person.

Earth's Biggest Shoe Store?

John Paczkowski — Wed, 22 Jul 2009 20:40:47 +0000

Well, this is unexpected. Amazon has agreed to purchase online shoe retailer Zappos.com in a deal valued at about $850 million.

If the shoe fits, right?

Below, Bezos announces the acquisition in person.

Barnes & Noble to Amazon: Mine Is Bigger Than Yours

John Paczkowski — Tue, 21 Jul 2009 09:00:36 +0000

Six years after shuttering its first e-book effort, Barnes & Noble has embarked on a new one. Monday afternoon, the bookseller announced what it describes as “the world’s largest eBookstore,” an online storefront that boasts 700,000 titles.

That’s substantially more than the 300,000 available for download on Amazon’s Kindle service, though half-a-million of them are public-domain books provided by Google (GOOG). They’ll be compatible with Apple’s (AAPL) iPhone and iPod touch, BlackBerry smartphones, and, when it finally arrives at market, the Plastic Logic eReader, a Kindle DX-size e-book reader for which the Barnes & Noble eBookstore will be the exclusive storefront.

“Today marks the first phase of our digital strategy, which is rooted in the belief that readers should have access to the books in their digital library from any device, from anywhere, at any time,” said BN.com president William J. Lynch.

With a few noteworthy exceptions, of course. E-books sold by Barnes & Noble (BKS) won’t be compatible with Sony’s (SNE) Sony Reader Digital Book or Amazon’s (AMZN) Kindle, which they are clearly intended to undermine.

To what degree they’ll manage that is anyone’s guess. One thing is sure: We’ll almost certainly be seeing an e-book price war in the near future. And when Apple finally gets around to uncrating that tablet/e-reader device it’s been working on, all bets are off.

Below, video of the Plastic Logic Reader demo from our D7 conference in late May.

[ See post to watch video ]

Barnes & Noble to Amazon: Mine Is Bigger Than Yours

John Paczkowski — Tue, 21 Jul 2009 09:00:36 +0000

Below, video of the Plastic Logic Reader demo from our D7 conference in late May.

[ See post to watch video ]

Kindle Now Only $299 More Than iPhone Kindle App

John Paczkowski — Wed, 08 Jul 2009 22:10:09 +0000

Amazon hasn’t said how many Kindles it has sold since launching the device in 2007, but it may soon be selling quite a few more of them. The company today dropped the price of the six-inch Kindle to $299, $60 off of its previous price. That’s certainly not a dramatic reduction, but it may be enough to drive consumers who’ve held off on purchasing the device to reconsider.

That said, even at this reduced price, the Amazon Kindle still costs $299 more than Kindle for Apple’s iPhone, which I’ve found to be a compelling way to read books. After six or so novels, I have no complaints about eye strain, screen size or glare. And honestly, I think I’m reading more now than I ever did before simply because I always have the book I’m currently reading in my pocket.

Anyway…

Today’s price cut makes you wonder if this presages a similar reduction for the Kindle DX, which at $489 could really use one. A bit too early, I suppose, since Amazon (AMZN) hasn’t yet announced pricing for subscriptions to the Washington Post (WPO) and New York Times (NYT). We’ll see, I guess.

Japan Alerts Amazon to Life's Two Certainties

John Paczkowski — Mon, 06 Jul 2009 22:17:39 +0000

Amazon’s days of booking sales from its business in Japan back to the United States may be coming to an end. The Tokyo Regional Taxation Bureau has demanded back taxes of $119 million from Amazon’s Japanese affiliates, Amazon Japan and Amazon Japan Logistics.

Typically, U.S. companies that do business in Japan without offices in the country aren’t required to pay taxes to the Japanese government. And Amazon (AMZN) has long counted itself among them, claiming purchases made through Amazon Japan are technically transacted in the states. Yet the company does have some retail infrastructure in the country through which it handles merchandise distribution, logistics and whatnot. And, according to the Bureau, that means Amazon has “permanent establishment” in Japan and should be taxed in the country under the U.S.-Japan tax treaty.

Another nasty tax headache for Amazon.com, which also faces calls for tax payments back in the U.S. and in Britain, France, and Germany as well. From the company’s annual report:

We Could be Subject to Additional Income Tax Liabilities
We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made.

Japan Alerts Amazon to Life's Two Certainties

John Paczkowski — Mon, 06 Jul 2009 22:17:39 +0000

Another nasty tax headache for Amazon.com, which also faces calls for tax payments back in the U.S. and in Britain, France, and Germany as well. From the company’s annual report:

We Could be Subject to Additional Income Tax Liabilities
We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made.

Toys R Us Takes Ball, Amazon’s $51 million, Goes Home

John Paczkowski — Fri, 12 Jun 2009 22:31:54 +0000

The long-standing legal dispute between Toys R Us and Amazon has been resolved in toy retailer’s favor, but at a much discounted price. In a regulatory filing submitted to the SEC Friday, Amazon said it has agreed to pay Toys R Us $51 million to settle claims that it violated an earlier exclusivity agreement with the company. Quite a sum, but far less than the $93 million in damages Toys R Us demanded when it first sued Amazon in 2004, accusing it of violating their partnership by allowing other merchants to peddle toys and baby products on its pages.

Amazon (AMZN) hasn’t yet commented on the settlement beyond the filing, which offers little more information than that it was “unanticipated” and will be charged to “other operating expense” in the second quarter.

The Bing Variations

John Paczkowski — Mon, 01 Jun 2009 18:00:55 +0000

[ See post to watch video ]

Boy, Apple’s Design Aesthetic Really Didn’t Rub Off on Kindle 1.0 at All, Did It?

John Paczkowski — Wed, 06 May 2009 10:45:37 +0000

What propitious timing. At a press conference in New York later this morning, Amazon (AMZN) is expected to announce a new large-screen Kindle designed for reading periodicals and textbooks. And yesterday, on the eve of the announcement, came word that the company had been awarded a patent on the original Kindle design. The patent, #D591,741, is entitled “Electronic media reader” and it makes just a single claim:

“The ornamental design for an electronic media reader, as shown and described.”

About as exciting as the original Kindle design it describes, but this isn’t a utility patent, so you can’t really expect much from it. That said, the reference citations it contains are interesting. Among the devices included: the iRex iLiad, the NUUTbook an early prototype of the One Laptop Per Child Foundation’s XO laptop and Apple’s MacBook Pro.

Note: Be sure to see the liveblog of the Amazon announcement in New York by MediaMemo’s Peter Kafka, starting at 10:30 a.m. EDT.

Amazon Closes Book on Distribution Centers

John Paczkowski — Fri, 27 Mar 2009 11:10:27 +0000

Amazon has weathered the recession better than most, but not without a concession… or three.

The retailer said Thursday that it is shuttering a trio of distribution centers in three states and will sack or transfer the 210 employees who work at them. It’s the first time Amazon (AMZN) has closed a warehouse since 2006. Amazon spokeswoman Patty Smith described the closures as a balancing of the company’s fulfillment network, but its hard to view that as anything other than a euphemism for belt-tightening when a facility in Munster, Ind. that Amazon opened just a year and a half ago is among the three centers to be closed. Also shutting down: facilities in Red Rock, Nev., and Chambersburg, Pa.

“A variety of factors went into the plan to close these three buildings,” Smith told TechFlash. “We added approximately 3 million square feet of capacity in the North American fulfillment network in 2008, and will be converting a fulfillment center in Phoenix to accommodate our larger items (such as big screen TVs) and adding several hundred thousand sq feet to that facility. This additional capacity allows to the opportunity to better balance product mix and customer orders across the network year-round.”

Shut Up, Kindle

John Paczkowski — Sat, 28 Feb 2009 00:55:04 +0000

Rather than argue with the Authors Guild over the text-to-speech feature of its new Kindle 2 e-book reader, Amazon is modifying the device’s software to make it optional. Authors and publishers will now be able to decide if they want the function enabled or not on titles for which they own the rights. Amazon (AMZN) announced the move in a statement released late Friday afternoon, in which it also said it believes the Kindle’s text-to-speech function to be legal:

Kindle 2′s experimental text-to-speech feature is legal: no copy is made, no derivative work is created, and no performance is being given. Furthermore, we ourselves are a major participant in the professionally narrated audiobooks business through our subsidiaries Audible and Brilliance. We believe text-to-speech will introduce new customers to the convenience of listening to books and thereby grow the professionally narrated audiobooks business. Nevertheless, we strongly believe many rightsholders will be more comfortable with the text-to-speech feature if they are in the driver’s seat.

Therefore, we are modifying our systems so that rightsholders can decide on a title by title basis whether they want text-to-speech enabled or disabled for any particular title. We have already begun to work on the technical changes required to give authors and publishers that choice. With this new level of control, publishers and authors will be able to decide for themselves whether it is in their commercial interests to leave text-to-speech enabled. We believe many will decide that it is.

The move comes on the heels of a meandering New York Times editorial in which Roy Blount Jr., president of the Authors Guild, argued that the Kindle’s roboticized nondramatic book readings are a threat to the audio book market.

QOTD

John Paczkowski — Wed, 11 Feb 2009 18:09:38 +0000

They don’t have the right to read a book out loud. That’s an audio right, which is derivative under copyright law.”

– Paul Aiken, executive director of the Authors Guild, on Kindle 2′s text-to-speech feature

QOTD

John Paczkowski — Tue, 10 Feb 2009 14:30:19 +0000

There is no vision for that. We deliver video to IP [Internet protocol]-connected devices today, but they aren’t made by Amazon. I don’t see why we would need to make such a device. There is a proliferation of such devices. Plus that technology is being built right into televisions.”

– Amazon CEO Jeff Bezos says the company has no plans for a video Kindle.

Amazon Shares on the Moon

John Paczkowski — Fri, 30 Jan 2009 15:25:27 +0000

Amazon’s much needed good news in a week full of bad news is proving a boon to investors. The nice gain the online retailer posted in its fourth quarter appears to be reviving traders beaten into submission by the worst economic malaise since the Depression. Amazon’s (AMZN) shares are trading up more than 17 percent as I write this. Sadly, the company’s good fortune doesn’t seem to be doing much for its peers. The tech-heavy NASDAQ is trending down and auction rival eBay (EBAY) is slipping, still suffering from those ugly earnings it reported earlier this week.

Amazon: Crash Proof?

John Paczkowski — Thu, 29 Jan 2009 21:26:31 +0000

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.