Amazon Posts Profit Gains as Offline Rivals Struggle

Amazon Posts Profit Gains as Offline Rivals Struggle
By BRAD STONE
Copyright by The Associated Press
Published: April 23, 2009
http://www.nytimes.com/2009/04/24/technology/companies/24amazon.html?th&emc=th


Amazon.com has joined Apple among the ranks of technology firms that are still growing robustly despite a shrinking economy.

Amazon, the online retailer based in Seattle, posted stronger-than-expected earnings during the slow winter months, attracting cost-conscious consumers with offers of free shipping and competitive prices for its wide variety of products.

Amazon’s net profit rose 24 percent, to $177 million, or 41 cents a share, in the quarter ending March 31, up from $143 million, or 34 cents a share, in the same quarter a year earlier.

The company’s first-quarter revenue climbed 18 percent, to $4.89 billion, slightly surpassing Wall Street’s expectations. Analysts polled by Thomson Reuters on average had expected $4.76 billion in revenue.

Some analysts say Amazon has benefited from the downturn, with struggles at the Borders book chain, the bankruptcy of Circuit City and turbulence at a rival, eBay, all driving traffic to Amazon.com. The company said its electronics and general merchandise sales were up 38 percent, while media sales rose 7 percent.

“Brick-and-mortar companies are going bankrupt and going out of business altogether and that is helping Amazon gain market share,” said Imran Khan, an analyst at JPMorgan.

Amazon shares rose up to 3 percent in after-hours trading. In the last three months, Amazon’s characteristically volatile stock price has jumped more than 40 percent as investors applauded market share gains, the introduction of the second version of the Kindle electronic book reader and new efficiencies in the company’s distribution system.

Wall Street has been looking particularly closely at sales of the new Kindle. Amazon released no new sales numbers, but Mr. Khan estimated that the company could sell more than half a million units this year and generate more than $96 million in revenue from the sale of digital books and other media for the stand-alone device and other mobile devices like the iPhone and iPod Touch.

Jeffrey P. Bezos, Amazon’s chief executive, said Kindle sales had “exceeded our most optimistic expectations.”

ISuppli, a research firm, recently estimated that the Kindle cost about $185 to produce, giving the $359 device a high profit margin. In a conference call with journalists, Amazon’s chief financial officer, Thomas J. Szkutak, disputed the estimate and said the production cost was significantly higher than that.

Amazon issued what Wall Street considered conservative guidance for the second quarter. It said that it expected revenue to rise 6 to 17 percent over the same quarter of last year but that operating income could fall as much as 49 percent.