Amazon Q411 net income plummets 58%; says Kindle device sales nearly tripled during holiday quarter

Amazon (AMZN) today announced financial results for its fourth quarter ended December 31, 2011.

Operating cash flow increased 12% to $3.90 billion for the trailing twelve months, compared with $3.50 billion for the trailing twelve months ended December 31, 2010. Free cash flow decreased 17% to $2.09 billion for the trailing twelve months, compared with $2.52 billion for the trailing twelve months ended December 31, 2010.

Net sales increased 35% to $17.43 billion in the fourth quarter, compared with $12.95 billion in fourth quarter 2010. Excluding the $101 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 34% compared with fourth quarter 2010.

Operating income was $260 million in the fourth quarter, compared with $474 million in fourth quarter 2010. The favorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was $5 million.

Net income decreased 58% to $177 million in the fourth quarter, or $0.38 per diluted share, compared with net income of $416 million, or $0.91 per diluted share, in fourth quarter 2010.

“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe,” said Jeff Bezos, founder and CEO of Amazon.com, in the press release. “Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold.”

Highlights

• During the nine-week holiday period ending December 31, 2011, Kindle unit sales, including both the Kindle Fire and e-reader devices, increased 177% over the same period last year.

MacDailyNews Take: All Kindles, including low-end US$79 B&W Kindle eReaders, lumped together. Note the lack of a hard unit sales number; selling 100 units of anything then selling 277 units, results in a 177% increase, too.

During the same period last year, Amazon’s Kindle devices started at US$189, significantly higher than the $79 price for the low-end Kindle this holiday season. In other words, “nearly tripling” was the best Amazon could do after hacking the entry level price by so much?

• Kindle Fire is the #1 bestselling, most gifted, and most wished for product across the millions of items available on Amazon.com since its introduction 17 weeks ago.

MacDailyNews Take: If Kindle Fire is oh-so-popular, why doesn’t Amazon give the real numbers?

• Amazon launched Kindle Stores at Amazon.it and Amazon.es. Kindle moved to the top of the bestseller list on launch day in both countries and held the top spot this holiday season. The new Kindle was also the bestselling product on Amazon.co.uk, Amazon.de and Amazon.fr.

MacDailyNews Take: “Kindle.” Which Kindle? All Kindles? Why the obfuscation, Amazon?

First Quarter 2012 Guidance

• Net sales are expected to be between $12.0 billion and $13.4 billion, or to grow between 22% and 36% compared with first quarter 2011.
• Operating income (loss) is expected to be between $(200) million and $100 million, or between 162% decline and 69% decline compared with first quarter 2011.
• This guidance includes approximately $200 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

Source: Amazon.com, Inc.

MacDailyNews Take: As always, Amazon gives no Kindle unit sales numbers. The charade continues.

MacDailyNews Note: Currently, Amazon shares have dropped 9.09% (-$17.68) to $176.76 in after-hours trading.

[UPDATE: 5:14pm EDT: Corrected 177% increase math as per ChrissyOne.]

[Thanks to MacDailyNews Reader “ChrissyOne” for the heads up.]

50 Comments

      1. Are you guys completely oblivious to what is going on around the world? Euro crisis and Iran situation? Amazing… you can guess when the next iPhone is coming out but not what might be happening to the financial markets soon.

        1. AMZN share dropped because their earnings fell and their sales missed targets, not because the Euro and European socialism were stupid ideas that were always doomed to fail.

          1. LOL! It’s not socialism which is killing the Euro economy. It’s the good old conservative “banks first, people second mentality”. They’re cutting their own legs off with austerity measures, just to make sure the banks get paid.

            But then, you’d know this if your interest in the situation extended beyond jerking a knee.

            ——RM

            1. Government borrows billions to fund corrupt socialism and you blame it on the banks?

              Only question is, are you really that stupid, or do you really think we are?

    1. The stock has been doing nicely, but it has been defying gravity, with no fundamental support.

      I mean Amazon’s full-year profit was around $634M, or about half the year before, and which is less than 1/20th of what Apple just made in a single quarter. That stock is dangerously close to pulling a Netflix.

    1. No kidding! Why doesn’t anyone at the shareholder meeting stand up and ask for actual numbers? It’s not some super-secret new product they’re covering up, they are entitled to such basic information in order to make (semi-)informed decisions about their Amazon holdings.

    1. I like Ballmer, please don’t pick on him, please ……

      I mean I like our position …. I mean the position he is in …..DRIVING tech forward …. Yea, I like our strategy, I mean his position ….

      I mean I’m not sure but I like the other Steve, so please don’t pick on him, please …..

  1. well, since there were no Fires last year, if the entire 177% increase in Kindle sales are Fire sales, and all Kindles sold at 1 million per week for 9 weeks, then Amazon sold about 5.75 million Fires this last quarter, accounting for about $1.15 bilion of the revenue increase. if the entire $239 million decrease in net profit was the fault of the Fire, then Amazon is losing $42 net on each Fire made.

    i know that’s all way too simple and overstated. but the truth is likely something in that direction.

    1. The entire 177% increase was certainly not attributable to Kindle Fires.

      You have no proof that “all Kindles sold at 1 million per week for 9 weeks.”

      Most likely the 177% increase is weighted heavily toward $79 stocking stuffer Kindle eReaders and that makes 177% look weak.

      Your “if” is too big a leap.

      1. did any of you guys read my second paragraph? comprehende?

        let me put it in little bites for you: the Fire, having sold some millions, added a significant amount to quarterly gross revenues, but also caused a significant part of the much reduced profits too. Amazon is taking a loss on every Fire sold, the only question is just how much that is.

    2. Yeah but there’s no way the entire increase was due to the Fire. Amazon slashed prices on Kindles across the board and ramped up their marketing. There would’ve been an increase even among regular ereaders.

      I don’t see how anyone can make any judgements based off the slivers of info that Amazon provides.

    3. Not correct. Amazon announced Kindle sales during the quarter, and gave hints on proportions. From that data it could be said that Kindle Fire sales are bigger than 3 million and less than 4 million.

  2. The $79 Kindle is a great product at a great price for what it is. My wife’s company gave one to all their employees. I can see Kindle sales going up for those, the Kindle Fire, not so much.

    1. I got the basic one as a gift, I agree It is superb for what it is: an ebook reader, nothing more. I read it on the bus to and from work. Wouldn’t dream of pulling out an iPad on the bus I take.

      Would never buy anything using it though–typing with the on-screen keyboard using the D-pad is painful, so I’d buy or load from my Macbook instead.

  3. Why all the dislike? Amazon is well-run company and the Kindle is a cheap and effective e-reader to support their book-selling market; Kindle isn’t in the same category as the iPad and isn’t likely to take away from iPad sales or popularity. Indeed, people I know – people who read for pleasure – have both.

    1. I agree. Some people just want to read books in a modern way. The Kindle is great for that. I think the pushback on Amazon is primarily from all the Press positioning the Kindle Fire as an iPad competitor. This is a preposterorous assertion, and it’s made iPad fans bristle. It’s also due to Amazon’s “spinning” sales numbers without details, and marketing-speak such as “most wished for” tablet. I suspect that given the choice 98% of those offered would choose the iPad over the Fire (and I’m being conservative).

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