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Amazon profits slump after heavy Kindle investment
26.10.11 | Lisa Campbell
Amazon’s profits have dropped by 73% in its third quarter, with the company's investment in its Kindle e-readers blamed for the slump.
In the three months to 30th September, net income fell from $231m (£144.4m) to $63m (£39.4m) year on year. Sales rose by 44% to $10.88bn (£6.8bn), in comparison to $7.56bn (£4.7bn) in 2010. In its international arm, including sites in the UK, Germany, Japan, France, China, Italy and Spain, the company reported sales were $4.94bn (£3.1bn), up 44% from third quarter 2010.
Following the release of the financial results, shares in Amazon fell 14.25% to $194.77 (£121.75). Analysts put the slump in profits down to investment in its new Kindle devices, Fire and Touch. However, Amazon was gloomy about the months ahead, suggesting it could make between a $200m (£125.0m) loss and $250m (£156.3m) profit in its fourth financial quarter. Evercore Partners analyst Ken Sena told Reuters: "We're not seeing the investment pay off yet, but I think investors are impatient as to how long will it take before you will start to see this pay off." He added, "When are we going to start to see some signs?"
In the UK, David Nicholls entered the top 10 Amazon bestsellers chart twice for his book One Day (Hodder), with the physical version entering as the second highest bestseller in the last three months and his Kindle book entering as the fourth besteller. However, Nicholls' title is the only physical book to enter Amazon UK’s top 10 bestselling list. Other authors in the top 10 with Kindle book sales include Penny Feeny with That Summer in Ischia (Tindal Street Press), which was Amazon UK’s third highest selling product; Neil White with Cold Kill (Avon) who entered in fourth position; and Elizabeth Haynes with Into the Darkest Corner (Myriad Editions), Amazon UK’s eighth bestselling product in the last three months. Its highest seller was the Kindle 3G with Wi-Fi.
The business said it released 61 titles through its Amazon Publishing programme during its third quarter.
Jeff Bezos, founder and c.e.o. of Amazon.com, said: "September 28th was the biggest order day ever for Kindle, even bigger than previous holiday peak days—we introduced Kindle Fire for $199 (£124.38), Kindle Touch 3G for $149 (£93.13), Kindle Touch for $99 (£61.88), and our all new Kindle for only $79 (£49.38).”
He added: “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 pre-orders, we're increasing capacity and building millions more than we'd already planned."