Sales up, Profits Down in Amazon Earnings; Amazon Prime and Kindle Fire Shine

amazonBy Jeremy Greenfield, Editorial Director, Digital Book World, @JDGsaid

Sales at Amazon were up 29% to $12.83 billion in its second quarter the Seattle-based tech and e-bookselling giant announced today at market close. Net profits at the company, however, were down 96% to $7 million, the company said in a statement.

The company disappointed analysts who predicted Amazon to post earnings of $0.02 per share on $12.90 billion of revenue; Amazon hit $0.01 per share.

In the first quarter, Amazon posted considerably better earnings. Fueled by the Kindle Fire, Amazon revenues jumped to $13.18, a 34% increase over the first quarter in 2011. Analysts had expected about $12.91 billion in revenue and slim profit margins. Net income for the quarter was $130 million, a decrease of 35% from its 2011 first quarter when net income was $201 million.

To investors, that $130 million profit quarter must look good compared with the paltry $7 million that Amazon brought in this quarter. Wall Street initially punished the e-tailer’s share price in after-hours trading, sending it down nearly 6%, but the stock has since recovered and is now up nearly 2% as up 5:19 PM Eastern time (check the price real-time here: AMZN ).

While Amazon’s sales grow and its profits shrink, its media sales continue to post gains over previous years, perhaps not at the pace the company would like. Worldwide media sales grew 13% to $4.12 billion, lagging behind the overall growth of sales at the company. This is also down significantly from last quarter when Amazon’s worldwide media sales hit $4.71 billion following another holiday season where likely millions of new Kindle devices were unwrapped.

In the earnings release, Amazon CEO Jeff Bezos focused on the growth of the company’s content offerings:

“Amazon Prime is now the best bargain in the history of shopping – that is not hyperbole,” said Jeff Bezos, founder and CEO of Amazon.com. “We successfully launched Prime seven years ago with free unlimited two-day shipping on one million items. The price of annual membership was $79. Since then, Prime selection has grown to 15 million items. We’ve also added 18,000 movies and TV episodes available for unlimited streaming. And we’ve added the Kindle Owners’ Lending Library – borrow 170,000 books for free with no due dates – it even includes all seven Harry Potter books. What hasn’t changed since we launched Prime? The price. It’s still $79. We’re very grateful to our Prime members, and thank them whole-heartedly for the business and for the word-of-mouth that has made this program grow.”

PaidContent reporter Laura Hazard Owen speculates that because Bezos calls Amazon Prime “the best bargain in history,” that a rate hike might be coming.

The Kindle Fire also shined in the earnings release. According to the company, it is still the No. 1 best-selling item across Amazon.com. Touting its self-publishing platform, Amazon also said that 20 of the top 100 selling Kindle titles in the second quarter were from Kindle Direct authors.

“We’re very excited about both the hardware and content side of the business,” said Amazon chief financial officer Tom Szkutak on a conference call with press and analysts. “We’re very excited with the progress we made so far on both a content and device perspective…and the roadmap we have.”

Last quarter, Bezos focused his portion of the earnings report on the Kindle and the book market.

Some analysts believe that the Department of Justice’s actions this Spring filing a lawsuit against Apple and five of the largest U.S. publishers will help Amazon and hurt its main rival in the book business, Barnes & Noble.

Amazon continues to add to its soaring headcount. Amazon increased headcount in the second quarter to 69,600 from 65,100 at the end of the first quarter and 43,200 at the end of the second quarter last year.

In the third quarter, Amazon expects to bring in $12.9 billion to $14.3 billion in sales but to record a $50 million to $350 million loss. On the conference call, Szkutak, the CFO, said that Amazon would continue investing for the future as it has in previous years.

See the entire earnings announcement here.

Related: Remember when Amazon set the pace for e-book pricing? It’s back!

Write to Jeremy Greenfield

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