Amazon Posts 57% Profit Decline, 177% Kindle Sales Increase

Joan E. Solsman:

Amazon.com Inc.'s fourth-quarter earnings fell 57%, and the Internet retailer again warned it could post an operating loss in the current quarter.

Shares were down 8.5% at $178 in after-hours trading Tuesday. The stock had hit its highest level ever in October and had since fallen 21% through the close Tuesday.

The company expects $12 billion to $13.4 billion in revenue in the current quarter, while analysts surveyed by Thomson Reuters on average had expected $13.41 billion. It said the operating bottom line could range from a $200 million loss to a $100 million profit.

Amazon's profits appear to be suffering under the weight of increased spending on the improvement of the company's digital infrastructure. Considering the company's rapid expansion into digital media distribution, such expenses are unsurprising, but are cast in stark contrast to its purported rival in the digital media space, Apple.

Of greatest interest is the 177% increase in Kindle sales over the same period in 2010. In other words, the new Kindle devices aided in nearly tripling sales in 2011. As for the actual quantity of devices sold, Amazon has remained predictably silent.

As the retail giant continues to supposedly encroach on Apple's media and tablet dominance, Amazon's lack of device numbers is concerning to say the least. Apple recently announced the sales of over 15 million iPads over the holiday period, and even the most generous estimates peg Kindle Fire sales at less than half of that.

I've repeatedly argued that Amazon is one of the only viable competitors in the tablet space, purely due to Jeff Bezos' apparent understanding of the importance of ecosystem. But regardless of good intentions and intelligent foresight, the lack of specific sales figures is becoming increasingly suspect. I don't expect the Kindle Fire to have sold on par with the iPad by any means, but I certainly expect it to have overtaken the vast majority of "competing" tablets. Trumpeting such success with specific figures, rather than vague and relative terms, would certainly lend some tangible credibility to Amazon's movements in the marketplace.

With all of the strong rhetoric and bold maneuvers in various markets, the lack of specifics is even more problematic when considering the company's advisory for the forthcoming quarter:

Operating income (loss) is expected to be between $(200) million and $100 million, or between 162% decline and 69% decline compared with first quarter 2011.

I can honestly say I'm rooting for Amazon -- I believe in strong competition -- but their current financial performance is subpar, and without any firm sales to account for the expansion in media infrastructure, these numbers become increasingly concerning.