Amazon’s heavy investing eats into bottom line, shares drop

Amazon’s heavy investing eats into bottom line, shares drop

SAN FRANCISCO Thu Jul 24, 2014 10:46pm EDT

(UPDATED BY ENDAH)
 

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. REUTERS/Rick Wilking

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008.

CREDIT: REUTERS/RICK WILKING

(Reuters) – Amazon.com Inc posted a much larger-than-expected loss in the second quarter as it continues its rapid pace of investment in new businesses such as digital content andconsumer electronics.

Amazon’s stock price has dropped 10 percent so far in 2014, with investors leery of betting on its long-term growth at the expense of little to no profit.

On Thursday, the shares fell another 10 percent in late trade, after the largest U.S. online retailer posted a loss of 27 cents per share, nearly double Wall Street’s average estimate for a loss of 15 cents.

The company also forecast an operating loss of between $810 million and $410 million for the third quarter ending in September, a sharp increase from a loss of $25 million a year earlier.

Amazon is investing heavily in new businesses and hardware products, as it prepares to take on major tech rivals from Apple Inc and Google Inc to Netflix.

Chief Financial Officer Tom Szkutak said Amazon had a “tremendous amount of opportunities” and its investments were “certainly impacting short-term results.”

The company is spending more than $100 million on original video content in the third quarter, a substantial increase compared to last year and the second quarter, Szkutak said.

“We’re going to continue to invest on behalf of customers with the understanding that long-term has to come,” he said during a call with reporters. “We’ll obviously be looking to get great returns on investor capital and high amounts of cash flow.

New products and businesses unveiled this year include a subscription book service, new digital content for its Prime online video service, a TV streaming-box and the upcoming “Fire” smartphone. Amazon is also spending billions of dollars expanding its network of fulfillment centers across the world.

Amazon reported a net loss of $126 million, or 27 cents per share in the second quarter, compared to a loss of $7 million, or 2 cents a share a year earlier. Total operating expenses rose 24 percent to $19.36 billion.

Revenue jumped 23 percent to $19.34 billion, in line with Wall Street’s average prediction of $19.3 billion, according to Thomson Reuters I/B/E/S.

Amazon’s steep price cuts for its cloud computing service made earlier this year limited growth in its “Other” revenue category, which includes its popular Amazon Web Services division, Szkutak told reporters.

The company’s stock fell to $323 in extended trade, down from a close of $358.61 on theNasdaq.

(Reporting by Deepa Seetharaman; Editing by Bernard Orr)

 

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I am a Project Manager (PMP) a Technology and Business Architect providing Data Security, Power, Infrastructure, Software and Hardware E-Commerce and Electronic payments. I live in Jakarta with my wife and children

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