Tech Shares

"Net Income Decreased 96%"

Amazon’s Q2 numbers are wild. And the release is just odd (why the quote about Amazon Prime, exactly?). Sales were up, but:

Net income decreased 96% to $7 million in the second quarter, or $0.01 per diluted share, compared with net income of $191 million, or $0.41 per diluted share, in second quarter 2011.

$7 million. Amazon made $7 million dollars last quarter on sales of $12.83 billion. That’s insane. Let’s pretend the sales were $12.837 billion. Amazon kept the 7, everything else vanished.

Yes, their Kiva Systems deal wiped out some profit, but not much ($65 million). This is not Microsoft writing-down billions due to an acquisition gone bad, this is just awful margins.

Worse, Amazon is now projecting a loss of anywhere from $50 million to $350 million next quarter (on sales of anywhere between $12.9 billion to $14.3 billion). Amazon has been warning about the possibility of a loss for the past few quarters. But they haven’t had a profit range fully in the red before. They very well could beat their numbers next quarter, but it sure looks like they think they’re going to dip into the red. They’ve been profitable for a decade.

Yes, I realize Amazon is viewed as a growth business (forgoing short-term profits for long-term gains). But these numbers keep going the wrong way. At some point, they have to start going the right way, right?

As I noted earlier, Apple’s “disappointing” quarter included $8.8 billion in profit. Or maybe I should write it this way: $8.800 billion — if that last zero was a seven and you removed everything before it, that would be Amazon’s profit.

But wait! It’s an Apple-to-oranges comparison! The same used to be said when comparing Apple’s profits to Microsoft’s. SInce Microsoft was a software company, their margins were far better which meant far more profit than Apple. Not anymore.

More importantly, all of these companies are increasingly competing all across the board — Amazon, for example, now finds itself in a dogfight with Google thanks to the new Nexus 7. The real difference is that only Apple seems to be making any money on the hardware side of things.