“The rumors are true,” Watson said in a Twitter post. “The team is in great hands.”

At Amazon, Watson will lead a group working on Kindle applications for various Amazon-made and non-Amazon devices.

Watson’s move was earlier reported by ZDNet’s Mary Jo Foley.

Update: Microsoft confirmed that Watson’s last day is Monday.

“Brandon did a great job helping us build a vibrant developer community and we wish him well with his next adventure,” a representative said in a statement.

Microsoft did not immediately say who would pick up Watson’s duties.

The comments follow a less than stellar fourth-quarter performance in which the gigantic e-commerce provider spent nearly as much money as it brought in the door — even during its busiest quarter of the year.

Profits for the quarter fell 58 percent, while annual earnings were cut nearly in half.

Some analysts were hoping that the end of the year would be a low point for margins and that Amazon would start growing in 2012 as it benefited from the steep investments made the prior year.

But that’s not part of the plan.

“We’re incredibly optimistic about the opportunity that we have, and that’s why we have invested the way we have and why we’re continuing to invest in the business,” said Amazon’s CFO Tom Szkutak in a conference call with analysts.

For clarity, Piper Jaffray analyst Charles Munster asked again: “So, your outlook in terms of investment philosophy hasn’t changed versus last quarter going forward?”

“No, no,” Szkutak said. “We are continuing to look as we always do. We learn every week, month and quarter about customer adoption. We are looking at a lot of positive things across the business in terms of adoption, specifically Kindle growth from a device standpoint and content that’s following that.”

Other categories seeing growth, he said, include clothing, consumables, consumer electronics and Amazon Web Services.

“There’s a lot of interesting opportunities that we continue to invest in. So we are pleased with the performance in Q4 and what it means going forward for us.”

Over the past year, Amazon has invested heavily in infrastructure, including 17 fulfillment centers around the globe. At the end of the year, it had 56,200 employees, up 67 percent year over year, with most of the hiring coming in operations and customer service.

It has also invested heavily in the digital content business, including the Kindle.

It’s widely assumed that Amazon is breaking even or taking a slight loss on the sale of each Kindle Fire. It’s also securing expensive partnerships with content companies across music, video and books, and giving some of that content away as part of the $80 Prime membership, which also includes free two-day shipping.

All of those are bets that Amazon is hoping will reap profits over the long term, as customers continue to consume after they purchase an e-reader or tablet or sign up for Prime.

So far, it’s too early to see how the investment is faring, especially when it comes to new categories.

“It’s very, very early,” Szkutak said, “but so far, we like what we see, so that’s why we are continuing down the path of adding more content and making Prime better. … Because we are investing a lot, we are making sure we understand it very well.”

A lot of details, like Kindle sales numbers, are still being kept under wraps, but he promised Amazon will someday share more about how it is doing.

Unfortunately, the market isn’t as patient. In after-hours trading, the stock was down almost 10 percent at one point. During the session, it ended up down, 8.7 percent, or nearly $17 , to close at $177.50 a share.

Can’t wait for high school calculus iBooks where kids have to triangulate Kindle sales with rubbish percentage data

– Dan Frommer, via Twitter

Coliloquy, a start-up demoing at D: Dive into Media, is running with that idea, in the hopes of creating a new kind of fiction-reading experience, built on the Amazon Kindle developer platform.

Books released using Coliloquy are written by authors but are released as “active applications,” rather than as e-books with a fixed set of pages.

For the reader, that means the books can be changed and updated over time, just like apps.

Serialized stories, like those that used to appear regularly in magazines, are just the beginning.

In some stories, readers have the option of selecting desired traits in the characters, which are then automatically woven into their version of the story.

In other words, your Fabio can be a brunet.

Romantic fiction aside, Coliloquy’s platform offer authors the ability to adjust stories based on feedback from readers — something previously sequestered in the nerdiest of fan-fiction forums.

Coliloquy stories are already available, but the demo at D: Dive Into Media showcased early-user data and the company’s first contemporary novel, as well as a new, personalized Erotica series.

We can’t wait to see what they’ve added to the conference swag bags.

The company earned $177 million, or 38 cents a share, on revenue of $17.43 billion.

Even though revenue was up 35 percent compared to the year-ago period, it fell short of Wall Street estimates. Fueling the bad news, Amazon also said net income fell 58 percent.

Amazon’s stock tumbled in after-hours trading, falling nearly 10 percent, or $19 a share, to $175.50. The stock recovered a tiny bit later in the session, trading down 8.8 percent.

Analysts had expected Amazon to report sales of $18.3 billion, up more than 40 percent from the fourth quarter in 2010, according to FactSet Research.

For the full year 2011, the company’s sales increased 41 percent to 48.1 billion, while net income fell 45 percent to $631 million, or $1.37 a share.

The Seattle-based e-commerce company, which is notorious for offering little insight into its results, did not stray from standard operating procedure. It’s still unclear how many Kindles and how many Fire tablets it is selling.

“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe,” said Jeff Bezos, CEO of Amazon.com, in a statement.

But it did not get any more detailed than “millions.” The company added that during the nine-week holiday period ended Dec. 31, Kindle sales — including the Fire — increased 177 percent over the same period last year. Furthermore, the Fire was Amazon’s most-gifted and most-wished-for product.

The big wild card for the quarter was not supposed to be revenue, but margins. The low margins of the Fire, and the company’s gigantic investments in infrastructure spending, such as warehouses, were expected to weigh down earnings.

Analysts were estimating that Amazon’s operating margin would fall to 1.3 percent from 3.6 percent last year.

Sure enough, the company’s margins were down, but it wasn’t quite as bad as people thought it would be. Actual operating margin for worldwide sales during the quarter fell to 1.5 percent.

Many investors were hopeful that some of those investments would wane in the first quarter, as Amazon started to reap the profits. However, the company’s first-quarter guidance is also less than expected.

Net sales are expected to be between $12 billion and $13.4 billion, representing year-over-year growth of 22 percent to 36 percent. Amazon is also expecting an operating loss of $200 million to a profit of $100 million, suggesting that heavy investments could continue.

NOTES FROM THE EARNINGS CALL

• After a riveting rundown of the company’s balance sheet and income statement, Amazon is opening up the call for questions.
• First question everyone wants the answer to: Can you talk about Kindle hardware units? A non-answer: “The only thing I can help you with is the holiday season — unit sales nearly tripled with Kindle and Kindle Fire, so we are very pleased with the growth we have,” says CFO Tom Szkutak.
• In North America, Amazon saw strong growth in digital media, for books, video and music. “All of those grew really well,” Szkutak says, but he said that most notably the videogame category, including consoles and games, was up in terms of unit volume, but down in terms of revenue.
• Another media area that grew was physical books, which were up double digits in the fourth quarter year over year. “We are very pleased, considering the shift to digital content and the rapid growth of the Kindle.”
• Seventeen fulfillment centers were built in 2011, and more are coming in 2012, but no precise numbers yet.
• In Q4, the company had 56,200 employees, up 67 percent year over year. “The majority of those increases is in operations and the customer service area. It supports a lot of the growth, and you are seeing that in our operating costs. Certainly you’ll see that over time go in cycles, but we are feeding the growth we are seeing.”
• A question about whether Amazon will slow down its level of investment. “No. No. We learn every week, month and quarter about customer adoption, and we are looking at a lot of positive things across the business, including Kindle growth from the device standpoint, and the content that’s following that,” Szkutak says. “We are seeing strong growth in categories like soft lines, like clothing, and in consumables, and very good growth outside of the supply-constrained areas in consumer electronics. … There’s a lot of interesting opportunities to invest in, and we are pleased with the performance in Q4 and what it means going forward for us.”
• Will investments continue in Amazon Prime? “We are investing a lot there, and we are making sure we understand it very well. We’ll continue to monitor it very closely, and over time, we’ll be sharing more about how we are doing there.”

So well, in fact, that the tablet market is often characterized as being a two-horse race between the tricked-out Amazon e-reader and Apple’s iPad.

But when it comes down to the numbers, the two companies couldn’t be more different, like comparing Apples to oranges.

Tomorrow, Amazon is expected to report a giant fourth quarter, but it’s guaranteed not to look anything like Apple’s monstrous results reported last week for the same period.

Here’s one data point: For the holiday period, Apple’s gross margin was an impressive 44.7 percent, up from 38.5 percent a year earlier. Meanwhile, analysts are estimating that Amazon’s operating margin will fall to 1.3 percent from 3.6 percent last year.

The specifications of the two tablets can be compared side by side, but a completely different vocabulary is needed to speak intelligently about the two businesses. Simply put, Apple is a hardware maker and Amazon is a retailer.

One has very high margins and the other doesn’t, resulting in two drastically different financial outcomes today. But over time, the idea is for that to change.

Rather than making money from hardware sales, Amazon’s approach to the Fire is to generate incremental sales from other goods and services on the device. Some analysts feel that, over time, that play can create a reliable and recurring revenue stream – and ultimately higher margins.

Tomorrow, Amazon is expected to report sales of $18.3 billion in the fourth quarter, up more than 40 percent from the same period in 2010, according to FactSet Research. Q4 earnings are expected to fall notably to 17 cents a share from 91 cents a year ago.

While revenue growth is impressive, the company’s profitability is being weighed down by losses from the $199 Kindle (which is not quite a break-even proposition), the construction of more warehouses across the globe (17 were added in 2011 for a total of 69) and other investments in infrastructure, like its cloud-computing services and media services, like video, music and e-books.

In contrast, Apple has a rich markup on its iDevices and doesn’t have much of the same overhead as Amazon.

Still, the number of consumers Amazon touches in just one quarter is staggering, and it continues to take share from brick and mortar retailers.

As J.P. Morgan analyst Douglas Anmuth points out in a report, e-commerce grew about 15 percent in Q4 in the U.S. due to strong holiday sales, but he expects Amazon’s growth rate to more than double that to 47 percent year over year.

Anmuth is also bullish that while the fourth quarter could represent a “low point for margins,” Amazon could start seeing an uptick in margin as soon as the first quarter, now that a number of services and some key infrastructure are set in place.

However, don’t expect much insight tomorrow into the company’s long-range plans. The Seattle-based company is typically short on details during its earnings release and call.

If it follows standard protocol, it could provide an update on warehouses being built next year, number of employees and other infrastructure investments, but will likely dodge answers about how many Kindles it shipped during the quarter, or how much Kindle Fire owners are purchasing on the devices.

For now, we’ll have to settle for analyst estimates.

On Sunday evening, Stifel Nicolaus analyst Jordan Rohan raised his estimate for fourth-quarter Fire sales to six million units from five million.

While only on the market for a limited time, that’s still a lot less than Apple, which sold 15.43 million iPads, up 111 percent year over year.

Amazon’s stock dropped 1.65 percent, or $3.22, today to close at $192.15 a share.

Rakuten is set on challenging Amazon’s global dominance by appealing to the third-party merchants Amazon works with today and by growing it’s digital content business to compete with the Kindle.

We recently learned about the company’s strategy through the eyes of Neel Grover, the CEO of Buy.com, Rakuten’s online shopping subsidiary in the U.S.

For now, Rakuten is admittedly Amazon’s much smaller competitor, though it is dominant in Japan.

The publicly held company is worth $14.5 billion compared to Amazon’s $85 billion market capitalization, and it pales in comparison to Amazon’s mass in the U.S. Buy.com is ranked 410th here versus Amazon’s sixth-place standing, according to Compete.

But Grover said Rakuten has a two-part plan for going up against Amazon.

First, it will target and partner with third-party resellers and merchants.

Amazon does this, too, but often ends up competing with the merchants because it has its own warehouses and products that it is selling, he said.

“Oftentimes Amazon will compete with the retailer. [Third-party merchants] teach Amazon what to buy and sell, which is ultimately not good for the merchant,” he said.

Rakuten, on the other hand, does not own any warehouses or any inventory itself and instead gives retailers — brick and mortar or e-commerce — the tools and traffic to support their own businesses.

In May 2010, Rakuten acquired Buy.com.

“I sought out Rakuten. … I thought their model was one that would give us a unique differentiator in the U.S. and we could learn and bring their model to our site and customers,” Grover said. “We are still in the final stages of transforming, and it’s taken a bit of time to get it transformed.”

But, he confidently added, “It will win out in the long-term.”

A similar approach is being taken by eBay, another e-commerce giant in the U.S.

The second part of Rakuten’s plan is to go after Amazon’s growing digital business, spanning music, e-books and other content.

In November, the Japanese company purchased Kobo, a runner-up in the e-reader race behind the Kindle and Barnes & Noble’s Nook. It paid $315 million in cash for the Canadian company.

Rakuten is banking on the Kobo in assisting with its move into providing downloadable media to consumers, starting with e-books.

At the time of the acquisition, Kobo CEO Michael Serbinis told All Things D that Rakuten will give Kobo the financial backing to grow internationally, as well as compete in the U.S.

“The U.S. is absolutely important. It’s fundamental. We have millions of U.S. users today, and we plan to grow that substantially, and internationally it represents a big opportunity as well,” he said.

Earlier this month, Buy.com started linking to Kobo from its site, so that consumers have the option of buying a physical copy of a book or a digital version. Other integration efforts are also under way.

It also wants to get into other digital content, like music. Back in 1999, Buy.com was one of the original sites to have a digital music store, but Grover said it was a pretty poor experience because of all the restrictions that record labels were mandating. A lot of that has now changed.

“We are definitely looking as a group at all digital content. … We are looking at different solutions, but today we have not continued on with our initial music store,” he said.

As with Kobo and Buy.com, acquisitions are always an option, he said.

“We’ll continue to look at everything that would make our business better. It hasn’t been shy over the past two years. We have a global vision to create an e-commerce marketplace offering all goods, and we continue to see that grow.”

And going up against Amazon, some serious growth is what Rakuten and Buy.com will need.

The share of U.S. adults who own tablet computers nearly doubled from 10 percent to 19 percent between mid-December and early January, while the same growth spike also applied to e-book readers, which also jumped from 10 percent to 19 percent over the same period. The driving force behind the surge in ownership, Pew said, was the relatively low cost of tablets like the $199 Kindle Fire and the $249 Barnes & Noble Nook tablet, as well as the price of some e-readers dropping below $100.

The new data comes after a period — from mid-2011 into the fall — in which there wasn’t a lot of change in the ownership of tablets and e-book readers, Pew said.

We already had an inkling that the Amazon Kindle Fire sold very well in its first few weeks on the market; a Barclays analyst has estimated that Amazon sold 5.5 million Kindle Fire tablets last quarter, and predicts that Amazon will sell 18.4 million Kindle Fires this year, giving Amazon half of the non-iPad tablet market.

Also not entirely surprising: Households with higher incomes bought more tablets, while women’s ownership of e-readers increased more than men’s. More than a third of those living in households earning more than $75,000 — 36 percent — now own a tablet computer, Pew said. Ownership of e-readers among women grew more than among men, from 11 percent to 21 percent; compared to a 5 percent increase for men, with just 16 percent of them owning e-readers.

Anecdotally, those cheaper tablets still are harder to spot “out in the wild” than the iPad, as my AllThingsD colleague, Peter Kafka, notes here, whereas iPads seem to be popping up everywhere, from the airport to the gym. Personally, I know a handful of female adults who got either Kindle Fire tablets or less expensive Kindle e-readers this holiday season.

The Pew report comes from the combined results of two surveys — one conducted Jan. 5-8 among 1,000 adults age 18 and older; and another, conducted Jan. 12-15 of 1,008 adults, with a margin of error of +/- 2.4 percentage points. The study is part of Pew’s research, supported by funds from the Bill and Melinda Gates Foundation, to look at how tablets and e-readers are impacting libraries.

(Photo courtesy of DJ Murdok/Flickr)

In November and December, the number of online transactions increased by 37 percent, and overall sales jumped by 25 percent. But the average ticket size declined by 9 percent, according to Chase Paymentech, which analyzes information across the top 50 e-commerce retailers.

As it turns out, more consumers are turning to e-commerce for more of their everyday spending, rather than reserving online purchases for big-ticket items.

Here are Chase’s three reasons for the decline:

• More consumers are purchasing digital media, which has a lower price point than most physical goods — MP3s cost less than CDs, e-books cost less than paperbacks, and apps cost less than game cartridges.
• Prices for popular electronics, such as tablets, e-readers and TVs, are falling.
• More retailers are offering free shipping, which eliminates the incentive to fill carts to reach a free-shipping threshold.

EBay, which is the first major e-commerce provider to report Q4 results, confirmed it was also seeing the trend. The company’s payments division, PayPal, reported smaller transactions during the fourth quarter across the merchants it serves.

John Donahoe, eBay’s CEO, explained in an interview that the biggest driver of that trend was eBay’s acquisition of Zong, a mobile payments provider that powers the sale of digital goods. In addition, Donahoe said retailers, including eBay, heavily discounted products in order to drive more purchases this holiday.

Amazon, which is the leading e-commerce provider, also said that it is selling a lot of low-priced digital goods, ranging from e-books to MP3s.

Historically, the company has said that Christmas is the largest day of digital sales on Amazon.com, followed by Dec. 26. In 2010, from Christmas Eve through Dec. 30, Amazon customers purchased three times more digital content — including Kindle books, magazines, movies, TV shows, music and digital games — compared to the weekly average for the year.

Despite transactions declining overall, Chase identified two exceptions: Apparel and footwear rose 6 percent; toys rose 10 percent year over year.

(Amazon photo courtesy of thisisbossi)

Something seems to have resonated with Jon Stewart and his “Daily Show” writers, who weighed in yesterday. Note that almost all of the footage they use in this one seems to come from a June 1, 2010, CNN report:

Schmidt is known for his candid (and sometimes odd) remarks, and today’s event didn’t disappoint.

“Google TV’s doing well,” he said to Wood, when asked about the company’s Internet TV efforts (an assessment with which Logitech’s CEO might disagree). Schmidt and Wood talked about the handful of electronics makers announcing Google TV plans this week, and Schmidt said a “whole bunch” of additional partners are expected later this year.

Schmidt then touted Google Music, and said that Google CEO Larry Page is leading the effort to standardize the user interface throughout Google’s properties.

But when asked about Microsoft as a competitor, Schmidt dismissed that company’s efforts. “Microsoft is trapped in an architectural problem they may not get through. Oh, I’m so sorry,” he said, feigning chagrin.

Apple, Schmidt said, has done very well, and said, as a former board member, he’s proud of that fact. But he still emphasized Google’s openness compared to Apple’s controlled system. Schmidt said Google is seeing 700,000 Android activations a day, totaling more than 200 million Android phones in the world. “Just do a little math with the numbers I just told you, and Android is on a billion-unit plan.”

In terms of Google’s core strategy for mobile, Schmidt said Google’s plan is to get everybody using its Ice Cream Sandwich operating system, and stressed, “We absolutely allow our partners to change the interface, as long as they don’t change user compatibility.”

Regarding the early success of the Kindle Fire — and how the device skirts the Google Android marketplace — Schmidt said, “Kindle Fire has also done well, but they chose — and they did so legitimately — they chose it not to be compatible with Android guidelines and the Marketplace. So it comes with some limitations; on the other hand, it comes with a very low price point.” He noted that, as with the original Kindle, Amazon seems to be taking a books-first strategy.

Later on in the event, Wood asked Schmidt what he thought the most important part of the tech ecosystem is — services, hardware or software.

Schmidt seemed slightly flustered, answering, “It’s all of them,” before going on to suggest, “I’ll answer another question for you, which is, what was the most surprising thing in 2011?”

That got a big laugh from the audience.

But Schmidt paid no mind. He just forged full steam ahead to say that the increasing focus on the cloud platform model means everyone’s a winner; he also said the “secret” in computing in these platforms is to make them “as open as possible.”

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The Barclays analyst has bumped up his sales estimates for the low-end tablet: He now thinks Jeff Bezos sold 5.5 million units last quarter, up from his earlier guess of 4.5 million.

DiClemente figures Amazon will now sell 18.4 million Kindle Fires this year, which would give it nearly half of the non-iPad tablet market.

It’s always important to remember that, unlike Apple, which sells media and apps via iTunes to help support its devices sales, Amazon is approaching this from the opposite direction: It wants people to buy its devices so they’ll be more likely to buy other stuff.

DiClemente takes a stab at this one, too: He figures that by 2014, the Kindle Fire and its descendants will be generating an additional $3.9 billion a year from incremental e-commerce spending, driven by customers who pick up the company’s Prime shipping program along with their tablet.

And he thinks that, during that same year, revenue from tablet content will eclipse tablet revenue, period: He figures devices will generate $3.9 billion, and content will be worth some $5.2 billion.

Back to present tense: Has anyone seen a Kindle Fire in the wild? I haven’t, and my thoroughly unscientific spot check of my pals and peers hasn’t turned one up, either. Of course, I also recall when seeing a Kindle e-reader on the subway — many months after the e-reader’s launch — was enough to warrant a blog post.

The problems kicked off this morning when Amazon started sending emails to select Kindle owners, alerting them to a free trial of “The Kindle Compass.”

In the email, Amazon failed to explain what “The Kindle Compass” was, and worse, implied that customers would be charged for it going forward.

An Amazon spokesperson said a second letter has been sent this evening, explaining that “The Kindle Compass” is a pilot project, and apologizing for any confusion over the price. “We built it to always be free for customers, and you will never be charged for it,” the company told its customers.

Still, the response comes hours after much of the damage had already been done.

Angry customers flooded Kindle forums, posting more than 100 complaints to topics called “Where is Kindle Compass Magazine?” and “Auto-Subscription to the Kindle Compass??”

The confusion was understandable.

In the original message, Amazon misled consumers about the terms: “If you enjoy your free trial, do nothing and your subscription will automatically continue at the monthly subscription rate.”

However, no rate was ever mentioned.

Even worse, those who contacted Amazon customer service said the reps weren’t familiar with the publication, so the best they could do was help them to unsubscribe to ensure they would not be charged. At this point, people are still confused as to what “The Kindle Compass” is all about.

A spokesperson did not return emails asking for more clarity on what the publication is, and it’s unclear how many customers were affected (not all Kindle owners received the email).

In the forums, the complaints centered on two concerns: That Amazon would sign them up for something they did not knowingly subscribe to, and that they may be charged for it.

One consumer, who used the name “Susabelle”, wrote: “I am absolutely APPALLED. Amazon, you should be completely ashamed of yourself!! An auto-subscription to a publication I’ve NEVER heard of, that you will be auto-billing me for after 14 days? HAVE YOU LOST YOUR MIND??”

Here is the apology Amazon sent to consumers this evening:

This morning we sent you an email regarding The Kindle Compass, a new free publication built by the Kindle editorial team that we’re piloting to a small number of Kindle customers.

This email incorrectly referred to The Kindle Compass as a subscription with a free trial. We built it to always be free for customers, and you will never be charged for it. We apologize for any confusion.

If you wish to unsubscribe from the pilot for The Kindle Compass you can do so from a link in the last section of the magazine, or from the Manage Your Kindle Subscriptions page at www.amazon.com/manageyourkindlesubscriptions.

• Nook sales are booming! They were up 70 percent over the holidays, driven by the new Nook Tablet, which apparently sold well, even though it was up against Amazon’s Kindle Fire and Apple’s iPad.
• Nook sales are disappointing: No one wanted to buy the black-and-white Nook Touch.
• Barnes & Noble’s digital business is booming! Content sales were up 113 percent over the holidays. By the end of its fiscal year in May, B&N figures it will have sold $450 million worth of digital stuff. That will put it on an annual run rate of at least $700 million — that’s 10 percent of last year’s overall sales.
• Things are so good, in fact, that the company might spin off its Nook/digital business altogether.
• But things aren’t that good: B&N lowered its guidance for every one of its 2011 fiscal year metrics, including revenue, EBITDA, and online and offline sales. It blamed the bulk of the change on those crummy Nook Touch sales, as well as additional investments it’s making. But I’m not quite sure how poor Nook Touch sales, for instance, affected revenue at its brick-and-mortar stores.
• To spell that out: B&N says fiscal-year revenue will be $7.0 billion to $7.2 billion, down from an initial forecast of $7.4 billion. Store sales are expected to increase 1 percent, instead of 2 to 3 percent; Barnesandnoble.com sales will be up 40 percent to 50 percent, instead of 60 percent to 70 percent; and EBITDA will be $150 million to $180 million, instead of $210 million to $250 million. Losses, meanwhile, will balloon up to $1.10 to $1.40 a share, instead of the initial forecast of 10 cents to 50 cents a share.

Got all that?

Investors certainly have. Or at least they seem to have drilled down the guidance change — the second one the company has made in the last couple of months. They are punishing the stock this morning, sending it down 27 percent.

Meanwhile, at least one part of the release makes sense: Nook Touch misstep aside, B&N certainly seems to have a found a fast-growth digital business. And spinning off the business would (theoretically) help them solve at least one problem they’ve been grappling with recently: How do you recruit stars to a tech business in a red-hot labor market (for tech, that is), when you can’t dangle red-hot stock options in front of them?

Did you know, for instance, that B&N has a couple hundred people working for them on digital stuff at a Palo Alto outpost? It’s true! But if the New York-based company is going to make a real go of taking on Amazon, Apple, et al, it’s going to have to beef up that group significantly, and that means convincing people that there’s as much upside there as there would be at a Facebook or a Dropbox, etc. Tough sell, but breaking off from a no-growth dead-tree business would be a start.

(Image courtesy of Shutterstock/Ronstik)

According to Experian Hitwise, the top search query the week before Christmas that included some variation of the term “gift card” was for “kindle gift card.” Apple’s iTunes gift card was not even close, ranking as the eighth most searched-for term. In between were several more generic combinations, including American Express or Visa, or terms like “cheap gift cards.”

This holiday season, spending on gift cards was expected to hit $27.8 billion, a four-year high, according to a survey conducted by the National Retail Federation.

The plastic versions of cash were the most requested items on people’s wish lists for the fifth year in a row. What was unusual was the increased number of shoppers who were willing to give them, shedding concerns about looking impersonal or lazy.

The average shopper was expected to spend $155.43 on gift cards, the highest amount since 2007.

Experian theorized that the Kindle gift card, in particular, was searched for so heavily because it made a practical companion gift to the record number of e-readers being purchased. It also said that the increase in gift card purchases drove higher traffic to retailers’ Web sites on Christmas Day, with visits up 31 percent year over year.

But what if you got a gift card you don’t want, or one for a restaurant or theater that doesn’t exist in your hometown?

There’s a secondary market for that.

Companies such as PlasticJungle.com, GiftCardRescue.com and CardPool.com will give you up to 90 percent of the voucher’s value — depending on the demand for the card. Likewise, you can also purchase gift cards for below face value on these sites.

Even better, if you didn’t get a Kindle gift card but wanted one, PlasticJungle and GiftCardRescue both have partnerships with Amazon that will give you an extra 5 percent on the value of the unwanted card if you swap it for an Amazon gift card instead of cash.

Whatever you do, experts suggest you don’t put the cards in a drawer and forget about them. The best deals are being offered now, so spend them.

But that could be a problem.

The device sells for about the same amount ($199) as it costs to make (about $202).

Amazon’s stock fell as much as 4 percent this morning after Goldman Sachs suggested that the Seattle-based company could miss analysts’ sales estimates for the current period.

The stock has recovered some since early this morning, and is now trading down 1.6 percent, or $2.74, at $171.15.

According to Bloomberg, Goldman analyst Heather Bellini said in a note today that Amazon’s sales may grow 38 percent from a year earlier, to $17.9 billion, which is less than analysts’ average estimate of $18.2 billion.

Bellini based her analysis on a comScore report that found online shopping increased 15 percent this year, compared to last year’s holiday season. Since Amazon is the largest e-commerce provider, she reasons that it would be difficult to outperform the average by a wide margin.

“While the comScore numbers are just one data point which does not capture international sales or breakout individual companies’ sales, taken alone they seem to suggest the potential for downside risk to consensus forecasts,” Bellini wrote.

Ultimately, strong sales of the Kindle Fire could help Amazon hit its sales estimates, since it is counting on the device to serve as a platform for the sale of more content. But in the short term, the Fire could hurt the company’s bottom line, a possibility Bellini did not address in her report.

In addition to comScore’s numbers not capturing international sales, its report also does not capture sales from mobile devices. Amazon said the Kindle Fire was the best-selling product on Amazon’s mobile Web site and across all of its mobile applications.

In all, Amazon said it sold more than one million Kindles a week in December.

Bellini reiterated a “neutral” rating and a price target of $190.

If eBay and Amazon listings are any indication, that appears to be the case.

Amazon.com currently lists 59 new 16 gigabyte Wi-Fi TouchPads, ranging in price from $263.69 to $272.99. There are also 18 used TouchPads (and a couple of refurbished ones) being sold via the site.

EBay shows more than a hundred 32GB TouchPads for sale, some available through auction and others through immediate purchasing, ranging from $225 to $350 (yes, really).

It’s a far cry from the fire sale on the device earlier this month, through HP’s own eBay channel. It was reported that the computer maker went through its remaining inventory in minutes at resale.

Of course, TouchPads were then going for a mere $99 — much less than the original asking price of $399 (for 16GB) and $499 (32GB).

The TouchPad first hit stores on July 1. But it failed to catch on with consumers, and HP announced six weeks later that it would be exiting the hardware business of its webOS software system. That meant the death of the TouchPad, which had seen disappointing sales, to put it kindly.

Suddenly, the discounted device became a hot item, with some vendors reselling fetching nearly $300 for the tablet on eBay.

In October, the tablet was offered as a part of a bundle with any HP- or Compaq-branded PC, through Best Buy, which had sold less than 10 percent of the 270,000 TouchPads it had in stock.

It’s hard to say whether the TouchPad would still be flying off virtual shelves now, post-holiday, if it was listed at a lower price point. HP recently decided to open up webOS to the outside development community, but there are still questions about the future of the platform. With no new apps coming for the killed tablet, and with users facing the possibility of a lack of technical support — not to mention the entrance of the $199 Kindle Fire into the tablet market — it’s hard to imagine that many people will want to pay exorbitant prices for HP’s tablet.

But for now it’s safe to say that consumers don’t seem to want to touch the TouchPad anymore.