Earnings Call: Amazon Sees Kindle As Additive, Not Cannibalistic

This story was written by David Kaplan.
Amazon (NSDQ: AMZN) CFO Thomas Szkutak wrapped up his summary of the e-tailer's Q3 earnings telling listeners that the company began seeing slower rates of growth as the quarter was coming to an end. While Amazon's net income gained 48 percent to $118 million ($0.27 per diluted share) beating a consensus analyst forecast of $0.25, and revenue rose 31 percent to $4.26 billion (missing analysts' estimates of $4.28 billion) it was the expectation of a weaker holiday season that sent shares downward roughly 14 percent. As to guidance, Szkutak said that the company felt that due to the uncertain economic outlook at the moment, it was best to offer only a limited view and offer a wide range of what could transpire in Q4.

-- On Kindle: Asked about Kindle and how it will affect Amazon's long-term profitability in its book segment: CEO Jeff Bezos: "Simply put, the prices of books will be cheaper. Most Kindle items are $9.99 now. We would hope to sell many more units, even if we make less money per unit, that would be the basis of strong business." As for whether Kindle might be cannibalistic, Szkutak added: "Kindle's affect is additive to physical book units. Post the purchase of a Kindle, owners buy 1.6 times as many book titles and the same amount of physical books." Still, Amazon did not provide further details of the product's growth, nearly a year after its launch.

-- Then and now: Asked about the dot-com crash seven years ago, Bezos was asked to explain the similarities and differences. Bezos: "We have so many more product categories, operating efficiencies are so different. I love our position today, becauyse we have been spending so much time making sure we are the low-cost provider. If you go back in time, tech-related was affected, such as tech books. Amazon's offerings are so much more diverse now. However, we have seen deceleration in items above $1,000. But we believe our low prices and free shipping will continue to make us attractive to consumers."

Release | Webcast (5:00 PM EDT)

By David Kaplan


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