Amazon posts $7 mn loss for 2Q
27 Jul 2013
Amazon.com Inc posted an unexpected net loss in the second quarter, as the world's largest online retailer continued to infuse funds into warehouses and digital content, fueling sales growth at the expense of profits.
The Seattle-based company suffered a net loss of $7 million yesterday, even as analysts projected net income of $28.8 million on average.
Chief executive officer Jeff Bezos had bet that near-term investments on cloud computing coupled with a massive delivery infrastructure that allowed the company to send packages anywhere in the country in two days would provide cash flow down the line.
Operating expenses were up 23 per cent in the latest quarter, with Amzaon building its digital media business, which delivered books, music and shows to its Kindle handheld devices.
Amazon was up 2.8 per cent to $312.01 at the close in New York, which saw shares up 24 per cent so far this year. Bezos' investment strategy had been rewarded by investors with one of the highest valuations among the company's peers, even as investments in infrastructure and technology led to short-term losses. Amazon was trading at about 59 times next year's earnings, as against a price-to-earnings ratio of 16 for EBay Inc, data compiled by Bloomberg showed.
According to analysts, Amazon.com, the world's largest e-retailer often straddled the thin line between profits and losses.
The company lost $7 million, 2 cents a share, after it earned $7 million, 2 cents a share, a year earlier. According to analysts, the company would turn a profit and make 4 cents a share.
Revenue rose 22 per cent to $15.7 billion, just meeting forecasts by analysts.
Dismal results from tech giants Google and eBay had already diminshed hopes for a strong quarter, and concerns were hardly eased by the lackluster outlook offered by the company.
Amazon.com expects revenues at $15.45 billion to $17.15 billion in the third quarter, with analysts putting the same in the middle of that range at $16.98 billion. Additionally, according to the company, its third-quarter operating loss would be down between $440 million to $60 million, higher than the $24.3 million projected by analysts.
CEO Jeff Bezos, meanwhile seems to be keen on building his company rather than making money. He offered no specific reason for the lacklustre peformance in the quarter. But it could be said with clarity, that the company continued to exist with paper-thin margins.
Meanwhile, according to commentators, the expansion of Amazon.com into something of a diversified technology firm than a traditional web seller of books and DVDs had required billions of dollars in pricey investments.
