Amazon Mum on Kindle Sales Data, Says It’s Pleased with Content Sales
Amazon again provided no data on sales of its Fire and other Kindle devices during an earnings call Thursday, but Chief Financial Officer Tom Szkutak said the company was pleased with the digital content sales to owners of those devices. “We're seeing customers certainly purchasing a lot of content” on the Fire tablets, in particular, and Amazon is seeing strong “engagement with the device,” he said. But “there’s not a lot of specifics I can give you on a per device basis from a content standpoint in terms of what the purchasing patterns have been,” he said.
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The company continued to be pleased with Kindle hardware sales, it said in a news release. Amazon’s strategy of working “hard to charge less” for its devices “is working,” CEO Jeff Bezos said. “Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point,” he said. The $199 Kindle Fire HD is the No. 1-selling product across Amazon globally, “even as measured by unit sales,” he said. The next two top-selling products globally for Amazon are the Kindle Paperwhite and entry-level $69 Kindle, he said. The No. 4 best-selling product is book three of the Fifty Shades of Grey series, he said.
Amazon hasn’t “even started shipping our best tablet,” the $299 Kindle Fire HD with an 8.9-inch screen, Bezos said in the news release. It ships Nov. 20 and offers some superior features to the iPad mini announced last week by Apple (CED Oct 24 p5), Amazon said. As examples, it said, the Fire HD offers 193 percent more pixels (2.3 million vs. 786,432), 56 percent more pixels per inch (254 vs. 163), the ability to watch HD movies and TV on the Fire HD while the iPad mini is just standard definition, better audio with dual stereo speakers and Dolby Digital Plus, and it costs $30 less than Apple’s device. Even the 7-inch Kindle Fire HD offers several better features than the iPad mini, including 30 percent more pixels (1 million on the 7-inch Fire) and 33 percent more pixels per inch (216 pixels on the 7-inch Fire), Amazon said.
Global electronics and other general merchandise (EGM) revenue grew 36 percent year-over-year to $8.6 billion in Q3 ended Sept. 30, Szkutak said on the call. Global EGM grew to 62 percent of total Amazon sales from 58 percent in Q3 last year, it said. North American EGM revenue grew 39 percent to $5.1 billion and accounted for 64 percent of total sales in the region, up from 61 percent. EGM revenue in other markets grew 30 percent to $3.5 billion and represented 59 percent of total sales there, up from 54 percent. As always, Amazon didn’t say how much of the EGM sales came from electronics alone. Global media revenue grew 11 percent to $4.6 billion, with North America growing 15 percent to $2.2 billion and other markets up 7 percent at $2.4 billion.
Total Amazon revenue grew 27 percent to $13.8 billion, it said. Amazon shares closed 6.9 percent higher Friday at $238.34 though the company posted a loss of $274 million, or 60 cents a share, after reporting a profit of $63 million, or 14 cents a share, in Q3 last year. The results this time included a $169 million loss related to Amazon’s equity-method share of the losses reported by LivingSocial, “primarily attributable to its impairment charge” of certain assets, including goodwill, it said. Amazon, in late 2010, invested $175 million in LivingSocial, a website that offers discounted deals to consumers for businesses in their local markets.
Operating profit in markets outside North America is being affected by the heavy investments that Amazon is making in capacity and new geographies including China, Italy and Spain, said Szkutak. He called China “a great long-term opportunity” for Amazon. It’s also “investing heavily in video content” via its LOVEFiLM subsidiary in Europe, he said.
Szkutak sidestepped a specific analyst question on whether Amazon plans to open brick-and-mortar pop-up stores for the holiday season as several other companies have done. “The vast majority, or the highest percentage, of our revenue is certainly coming from our online sales. We do, in the case of Kindle, [use] physical world retailers as well, which we're very happy to do,” he said in response to the query. But brick-and-mortar is “not really a driver of our business,” he said.
Amazon expects to report revenue of $20.3 billion to $22.8 billion for Q4, it said. The company expects capital expenditures for ongoing operations to be up to $1 billion in Q4, “driven primarily by our expectations of continued business growth consisting of investments in technology infrastructure, including Amazon Web Services and additional capacity to support our fulfillment operations,” said Szkutak. It expects additional capital expenditures of about $1.4 billion related to the purchase of its now-leased corporate office space in Seattle, he said.