Long-term strategy sends Amazon Q4 stocks lower

More surprisingly, revenue grew at a slower clip than Wall Street had expected. The company also gave a disappointing guidance for the current quarter. Investors punished the online retailer's stock in after-hours trading.

Seattle-based Amazon.com Inc. said Tuesday that its net income was US$177 million, or 38 U.S. cents per share, in the three months that ended Dec. 31. That's down 57 percent from US$416 million, or 91 cents per share, a year earlier.

Revenue grew 35 percent to US$17.4 billion. Though it was buoyed by solid holiday sales, the figure fell below the US$18.3 billion that analysts polled by FactSet had expected.

Amazon's operating expenses, meanwhile, grew 38 percent to US$17.2 billion. The company has been investing heavily in new sales-fulfillment centers so it can grow its business. That has cut into profits all of last year.

For the current quarter, Amazon is forecasting US$12 billion to US$13.4 billion in revenue. Analysts were expecting US$13.42 billion. The company also said it may record an operating loss for the quarter. Its outlook was in the range of a loss of US$200 million to a profit of US$100 million for the three months ending in March.

Citi Investment Research analyst Mark S. Mahaney said the results were surprising. Analysts had been worried about Amazon's profit margins because of the heavy spending, but they had expected stronger revenue growth. Online shopping was popular over the holidays, and the midpoint of Amazon's revenue guidance had been higher than what it reported Tuesday.

Although the company's earnings of 38 cents a share were well above Wall Street expectations of 17 cents, investors seemed to focus on the bad news elsewhere.

Amazon said sales of its Kindle tablet computers and e-reader gadgets nearly tripled compared with the final quarter of 2010. As its custom, the company did not give exact sales numbers for the devices.

The Kindle Fire, Amazon's answer to Apple Inc.'s popular iPad, went on sale in November. The company sees the Kindle as a way to drive sales of digital content such as e-books, music, movies and apps.

CEO Jeff Bezos said the Kindle was Amazon's bestselling product during the holiday season in both the U.S. and Europe.

Sales at Amazon's media business, which includes books, DVDs, and content consumed on the Kindle, grew 15 percent to US$6 billion. Sales from electronics and other general merchandise, which includes the Kindle devices, jumped 48 percent to US$10.9 billion.

The company grew its employee base 67 percent from a year earlier, ending the year with 56,200 full-time and part-time workers. Chief Financial Officer Tom Szkutak said the job additions were in operations and customer service to support Amazon's growth.

For all of 2011, Amazon earned US$631 million, down from US$1.15 billion a year earlier. Revenue grew to US$48.1 billion from US$34.2 billion.

Amazon's stock dropped US$17.44, or 9 percent, to US$177 in after-hours trading following the earnings announcement.

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