Amazon shares down as company preps for Kindle Fire
By Hayley Tsukayama,
Amazon shares opened down 11 percent following a miss on its third-quarter earnings. The company reported profits of $63 million, compared to $231 million in the same period the previous year.
The drop in net income seems to be largely a factor of Amazon’s investment in its own growth and in the Kindle Fire — its $199 tablet set to ship on Nov. 15.
It’s no surprise that Amazon, of all companies, is taking the long view. The company also offered weak guidance going into the fourth-quarter, telling investors to expect $16.45 billion to $18.65 billion in sales when most analysts were expecting a baseline of at least $18 billion. The company also forecast anywhere from $200 million in losses to $250 million in profit for the next quarter.
Investors clearly are antsy about whether or not Amazon will be able to pull off its next low-cost revolution, as shares have been trading consistently around 11 percent down all morning.
It has been a bumpy quarter for Amazon, which has had to deal with some political issues in the past quarter that have dinged its reputation. Not only has the company been wrangling with the state of California and others over state sales taxes, it’s also faced some controversy over the way it treats its workers. According to a report from the Pennsylvania newspaper The Morning Call, workers in Amazon’s warehouses in the area have been forced to work under incredibly hot and uncomfortable conditions.
The Morning Call report prompted the company to release a statement regarding worker safety earlier this week, posting statistics showing it’s “safer to work in the Amazon fulfillment network than in a department store.”
In a report from The Street, Jeanine Poggi argues that Amazon has sacrificed profit before to get its products into the hands of consumers and build off that base. With the Kindle Fire, for example, the company is expected to take a loss on every device sold, but plans to net a profit from media purchases. The devices have already sold well in the pre-order stage, and its direct, easy-to-use link to Amazon’s shopping services gives it a lot of potential to create loyal customers.
In other words, if Amazon can get through this latest round of growing pains, it is on track to continue its rapid growth.