Friday, 1 February 2013

Amazon. Shares jump after results. Book sales +5%. But Ebook sales +70%. On the verge of greatness.

Amazon shares are moving upwards (+10%) on foot of their last Q4 quarterly results which showed a jump in operating income to 405m usd from 206m usd a year ago. Not bad, up 22%. 

Revenue rose 21% to 21 billion usd although below industry expectations, slightly......

Down 47% was its profit - down from 177m usd to 97m and that's the number that's got the headlines when in fact, the key measure should be growth and operating income. Living Social, Kindle investment and increasing distribution centres all dragged the profit down. Cloud computing services, video content (its LoveFilm video streaming on demand service) sales helped to lift it.

Operating margins were up too (the % of profit on a sale) and that bodes extremely well for the company that has struggled to make significant margins and profits over its existence. It is now on the threshold of greatness. 

Sales of books were up 5% but ebook sales were up 70% (!) and Kindle Fire being its most popular product on the site. Amazon are also forecasting +15% growth (and as high as +25%) in this quarter (Q1 2013).

The main driver is the Kindle and the transition from printed books to ebooks. Like Apple's Itunes business, Amazon are ready for this long term. So too their video movie business which competes with Netflix. Ebooks are now a multi-billion business and this is the company that's driving it.

I'm a fan of Amazon.

What they're doing with Kindle, is actually bringing a low-cost Ipad to market. The core functionality might be book reading, but video and social and email and everything will be there soon. Own the device, you own the content.

As regular readers (well okay, the 2 regular readers) of this blog will know, I'm a voracious reader but I switched early to Kindle with some reluctance. However, I have never looked back and nor has anyone I met who made the change.

Fantastic innovation - which as we know, like Apple, is the key to success.
Fantastic Amazon.