Amazon: Did the Recession-Friendly Kindle Lineup Backfire on Profits?

Amazon: Did the Recession-Friendly Kindle Lineup Backfire on Profits?

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Despite an impressive jump in sales, Amazon's heavy investments in its cheap lineup of Kindle e-reader tablets may have backfired on profits, which fell by 73% in the third quarter.

The Atlantic Wire reports that since the tablet line-up is so cheap, the Kindle Fire is actually sold for less than its cost of production. Amazon (AMZN) knew the Kindle's "recession-friendly" lineup would make a dent in profits, but few were prepared for the final numbers…

The drop from $231M a year ago to $63M in the most recent quarter has investors in a bit of a stir. "Amazon shares dipped 16 percent in after-hours trading following the release of the company's third quarter earnings report. Funnily enough, Amazon itself actually thought their operating income numbers would be even worse."

Here's the catch: Sales are up 44% year over year, hitting $10.88 billion. On September 28th (the last day of the third quarter), CEO Jeff Bezos said in a statement, "In the three weeks since launch [of Kindle Fire], orders for electronic ink Kindles are double the previous launch… And based on what we're seeing with Kindle Fire pre-orders, we're increasing capacity and building millions more than we'd already planned."

And according to The Atlantic Wire, a set of leaked sales figures indicate that the Kindle Fire is on track "to beat the so far unbeatable iPad." The number of Kindle books sold has also skyrocketed since entering the market in 2007.

Does this sound like a company who's been beaten down more than it should?

To help you explore the company we include Kapitall tools to help analyze the company's performance.

To start, press play on the Compar-O-Matic to compare changes in average analyst recommendations of Amazon against its industry competitors.

 

Use the Turbo Chart to see how Amazon's stock performance compares to the S&P 500 index:

 

 

By Rebecca Lipman.

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