TMCnet News
Amazon's heavy investing eats into bottom line [ITWeb](ITWeb Via Acquire Media NewsEdge) A box from Amazon.com is pictured on the porch of a house in Golden, Colorado. Picture by Reuters Amazon.com posted a much larger-than-expected loss in the second quarter as it continues its rapid pace of investment in new businesses such as digital content and consumer electronics. Amazon's stock price has dropped 10% so far in 2014, with investors leery of betting on its long-term growth at the expense of little to no profit. On Thursday, the shares fell another 10% in late trade, after the largest US online retailer posted a loss of 27 cents per share, nearly double Wall Street's average estimate for a loss of 15 cents. The company also forecast an operating loss of between $810 million and $410 million for the third quarter ending in September, a sharp increase from a loss of $25 million a year earlier. Amazon is investing heavily in new businesses and hardware products, as it prepares to take on major tech rivals from Apple and Google to Netflix. CFO Tom Szkutak said Amazon had a "tremendous amount of opportunities" and its investments were "certainly impacting short-term results". The company is spending more than $100 million on original video content in the third quarter, a substantial increase compared to last year and the second quarter, Szkutak said. "We're going to continue to invest on behalf of customers with the understanding that long-term has to come," he said during a call with reporters. "We'll obviously be looking to get great returns on investor capital and high amounts of cash flow." New products and businesses unveiled this year include a subscription book service, new digital content for its Prime online video service, a TV streaming-box and the upcoming "Fire" smartphone. Amazon is also spending billions of dollars expanding its network of fulfilment centres across the world. Amazon reported a net loss of $126 million, or 27 cents per share in the second quarter, compared to a loss of $7 million, or two cents a share a year earlier. Total operating expenses rose 24% to $19.36 billion. Revenue jumped 23% to $19.34 billion, in line with Wall Street's average prediction of $19.3 billion, according to Thomson Reuters. Amazon's steep price cuts for its cloud computing service made earlier this year limited growth in its "Other" revenue category, which includes its popular Amazon Web Services division, Szkutak told reporters. (c) 2014 ITWeb Limited. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info). |