paidContent - Earnings: Amazon Follows Zappos Buy With 10 Percent Profit Drop

This story was written by Staci D. Kramer.

Amazon (NSDQ: AMZN) made its big splash for the week Wednesday, with its $847 million acquisition of shoe retailer Zappos.com propelling it to a 52-week high ahead of today’s earnings. But it’s coming down to earth a bit now that the actual Q209 numbers are out, with net income down 10 percent to $142 million on sales of $4.65 billion, up 14 percent. (Amazon blames bad foreign currency rates for keeping it from a 20 percent sales gain.)

	2Q 2009	2Q 2008	Analysts’ Estimates
EPS	$.32	$.37	$.31
Net Income	$142M	$158M
Revenue	$4.65B	$4.063B	$4.7B

Where’s the Kindle in all this? It gets much of the buzz but contributes little to the bottom line at this point—although the company does list the recent price reduction to $299 as a “highlight.” During the earnings call, CFO Thomas Szkutak declined to detail device sales, saying that the company is “seeing very good growth” and that the Kindle is “exceeding expectations.” (CEO Jeff Bezos was traveling and not on the call.) Asked about taking Kindle overseas, Skutak called going international “an opportunity.” He added: “Our customers have certainly expressed an interest but we have a long-standing practice of not talking about what we do.”

Earnings release | Webcast | Slides | Transcript (via SeekingAlpha)

As for Zappos, Szkutak stressed that the acquisition is “not about synergies, this is about growing in categories that we think are very interesting.” Amazon has a track record of having multiple brands selling within the same category, and he urged analysts to think along those lines rather than Zappos replacing anything Amazon is already doing in shoes and apparel.

—More on Kindle: The Kindle catalog number also gets a highlight mention, moving to more than 320,000 from more than 300,000 titiles. That number took on some significance—beyond being a gauge of how well Amazon is doing at converting publishers—when Barnes & Noble went live with an e-book store claiming 700,000-plus titles. Some 500,000 of those are free, though, so Amazon still leads in books that can be sold. And in books it can lose money on since the company makes up the difference for selling titles at a lower price.

By Staci D. Kramer

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