Amazon results disappoint investors

Global internet retailer Amazon grossed less revenue from digital media than expected in 2011, especially in the video-game market.

The company is now looking increasingly to third-party sellers, which would bolster profit but generate less revenue than direct sales. Amazon investors, conditioned as they are to consistent strong growth, are disappointed, say industry experts.

The Amazon stock was down as much as 10.64 euros (down 6.6 per cent) to the equivalent of $179.23 in Frankfurt. The company's shares fell $21.80 to $172.64 in extended trading in the US yesterday. The stock, up 15 per cent over the past 12 months, had closed at $194.44 earlier in the day.

According to the company, first-quarter operating income may range from a loss of $200 million to a gain of $100 million and analysts were projecting a profit of $268.1 million.

Amazon said sales would be $12 billion to $13.4 billion, as against an estimate at the top of that range.

Meanwhile, chief executive officer Jeff Bezos is squeezing margins as he looks for growth, looking to add customers and include shipping costs in its offering of Kindle devices at cut-rate prices.
Some analysts said while they were expecting profit to be down, the sales slowdown was tough to accept.

Amazon's third-party sellers use the company's site to sell their products and provide a commission. Unit sales by outside retailers had surged 65 per cent during the holiday quarter and now constitute 36 per cent of units sold, Bezos said in the statement. Total sales were up 35 per cent.