At first glance, Amazon’s 2011 third quarter earnings report—released after US trading hours on Tuesday–sent some folks screaming in fear; the company’s stock plunged a good 12% before analysts could address the fearful perceptions. Eventually, the stock rallied a bit but still ended down 4.4%.
Amazon’s 2010 third quarter revenue reportedly stood at 7.9 billion, up 39% from that same period in 2009. The forecast for 2011′s third quarter (by the company) in July was somewhat rosy: $10.3 billion to $11.1 billion. The actual revenue figure—according to Amazon–for 2011 third quarter was $10.9 Billion, not too far from the top of the prediction plateau.
So, why the unexpected drop in market share prices (and subsequent gloating by competitor fans)?
Well, Amazon’s been spending–more so this quarter than they’ve done in awhile—burning off old growth by investing in 17 new customer “fulfillment centers” (adding to their existing 52), reinvesting in the Kindle devices & adjacent digital content and putting out a hot new product, the Fire Tablet.
“You have to go back to year 2000 to see those kind of growth rates,” Chief Financial Officer Tom Szkutak said during a conference call with reporters. CEO Jeff Bezos forked over a few details about the health of the company’s family of Kindles. Apparently, in the Amazon’s third quarter earnings release, Bezos said their darling device’s “biggest order day ever” was Sept. 28.
Bezos also indicated that advance orders for the Fire tablet are “so high” that Amazon is making “millions more” than it had intended to, and that other models have been selling 2Xs as quickly since Sept. 28 than they did after the previous ‘launch’ of a Kindle device. However, Amazon did not release concrete details about Kindle sales, but the company appears to have strong faith that both new and ‘old’ devices will bolster Q4.
Amazon rounded out their press release with revenue expectations of $16.5 billion to $18.7 billion in the October-December quarter, they may just get it; this is the holiday ‘honey hole’ quarter for most retail businesses. Analysts–for the most part–expect Amazon to garner $18.1 billion in revenue for Q4.
After querying several hundred contacts in the eReading, writing and publishing industries—including writers and reviewers—I received back a wide variety of replies, ranging from the extremes of “Apple-and-Amazon-have-nothing-in-common-you-know” quips from die-hard Apple fans to “I-can’t-wait-for-my-Fire-tablet-to-get-here” anticipation from devoted Kindle users.
The overwhelming majority of the replies, however, were skeptical of the stock drop, pointing out that hype and fear was driving the market verses considering the numbers:
“If Amazon’s figures can be trusted, and this is a big if, then they are like any other business that employs the Spend Money To Make Money rule,” one contact replied.
“People freaked out when Apple didn’t hit their projected revenue,”a fellow writer (and owner of an iPad) wrote, “Their stock went down on similarly unjustified fears.”
“Amazon’s a monster company,” wrote a another contact and fellow book-reviewer. “I don’t think they need my sympathy or my money… but I’ll probably end up buying half my holiday gifts from them anyway, the other half from eBay.”
She and I, both.
