Amazon Q3 Report Shows Mixed Results

October 26th, 2011 at 9:46 am
 


Amazon has recently released their financial report for the 3rd quarter of this year. According to the report, Amazon displayed mixed results for this quarter, showing an increase in net sales while showing a substantial decrease in net income. The report stated that Amazon enjoyed a substantial increase in net sales at $10.88 billion which was up to 44 percent as compared to the previous 3rd quarter numbers of $7.56 billion. A big factor in the sales increase has been its Kindle e book product and its many models.

But in contrast, Amazon reported that it only was able to post a net income of $63 million in the current 3rd quarter, an astounding 73 percent decrease for net income made in the previous 3rd quarter at $268 million. How would an increase in net sales translate to lower net income you say?

Well, the most probable explanation for the mixed showing of numbers for this quarter may lie in the fact that Amazon may be selling their Kindles at a loss. For every Kindle that they sell, they stand to lose out on capital, hence the mixed numbers for this 3rd quarter. But it may not be that bad for Amazon in the long run.

Amazon could have afforded to sell their Kindles at a loss since it could be used as a vehicle for the company to sell their other products. More and more Kindle users would mean a bigger consumer base for Amazon to sell their e-books and even TV shows and movies. This would translate into a better income stream for the company in the long run.

While this 3rd quarter may not show anything conclusive yet, the pre-orders for its upcoming Kindle tablets do. Amazon has reported that pre-orders for the upcoming Kindle Fire have been quite impressive, leading the company to produce millions of additional tablets more than they usually expected to make. This will show that Amazon may have taken some necessary risks in order to establish for themselves a more profitable future. And its results may not be far from seeing.

 

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