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Kindle Fire Burning Amazon’s Profits

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Kindle Fire Burning Amazon’s Profits

Kindle Fire Burning Amazon’s ProfitsOn Tuesday afternoon, Amazon reported third quarter earnings of only $63 million, which is considerably less than the $231 million earned in the same quarter last year. The net earnings of $63 million, which equals 14 cents per share, fell short of analysts’ predictions of 24 cents per share.

In addition, even though third quarter revenues grew by 44% to $10.88 billion, the company was expected to post total revenues of $10.95 billion.

In the following statement, Amazon’s CEO Jeff Bezos indicated that the Kindle Fire is experiencing high demand:

“In the three weeks since launch, orders for electronic ink Kindles are double the previous launch and based on what we’re seeing with Kindle Fire preorders, we’re increasing capacity and building millions more than we’d already planned.”

Although it appears the Kindle Fire will continue to sell at a rapid pace, strong tablet sales may not be enough to improve the company’s earnings in the immediate future. In late September, Amazon indicated they are selling the Kindle Fire units for a loss, but they hope to leverage their cloud-based content delivery system to make money off of the devices in the long run.

In addition to the low or negative margins on the Kindle Fire units, Amazon is heavily investing in the infrastructure to support the digital media people will be accessing on their Kindles.

In yesterday’s earnings statement, Amazon acknowledged it may post an operating loss for the fourth quarter. Amazon is predicting earnings to fall between a $250 million profit and a $200 million operating loss on projected revenue between $16.45 billion and $18.65 billion.

As a result of the earnings announcement and other news, Amazon’s shares dipped 17% in after-hours trading.

[Sources Include: AllThingsD, CNET, & Forbes]

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David Angotti

After successfully founding and exiting an educational startup in 2009, I began helping companies with business development, search engine marketing ... [Read full bio]

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