Amazon's heavy investing eats into bottom line, shares drop

SAN FRANCISCO Thu Jul 24, 2014 6:05pm EDT

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. REUTERS/Rick Wilking

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008.

Credit: Reuters/Rick Wilking

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SAN FRANCISCO (Reuters) - Amazon.com Inc posted a much larger-than-expected loss in the second quarter as it continues its rapid pace of investment in new businesses such as digital content and consumer electronics.

Amazon's stock price has dropped 10 percent so far in 2014, with investors leery of betting on its long-term growth at the expense of little to no profit.

On Thursday, the shares fell another 10 percent in late trade, after the largest U.S. online retailer posted a loss of 27 cents per share, nearly double Wall Street's average estimate for a loss of 15 cents.

The company also forecast an operating loss of between $810 million and $410 million for the third quarter ending in September, a sharp increase from a loss of $25 million a year earlier.

Amazon is investing heavily in new businesses and hardware products, as it prepares to take on major tech rivals from Apple Inc and Google Inc to Netflix.

Chief Financial Officer Tom Szkutak said Amazon had a "tremendous amount of opportunities" and its investments were "certainly impacting short-term results."

The company is spending more than $100 million on original video content in the third quarter, a substantial increase compared to last year and the second quarter, Szkutak said.

"We're going to continue to invest on behalf of customers with the understanding that long-term has to come," he said during a call with reporters. "We'll obviously be looking to get great returns on investor capital and high amounts of cash flow.

New products and businesses unveiled this year include a subscription book service, new digital content for its Prime online video service, a TV streaming-box and the upcoming "Fire" smartphone. Amazon is also spending billions of dollars expanding its network of fulfillment centers across the world.

Amazon reported a net loss of $126 million, or 27 cents per share in the second quarter, compared to a loss of $7 million, or 2 cents a share a year earlier. Total operating expenses rose 24 percent to $19.36 billion.

Revenue jumped 23 percent to $19.34 billion, in line with Wall Street's average prediction of $19.3 billion, according to Thomson Reuters I/B/E/S.

Amazon's steep price cuts for its cloud computing service made earlier this year limited growth in its "Other" revenue category, which includes its popular Amazon Web Services division, Szkutak told reporters.

The company's stock fell to $323 in extended trade, down from a close of $358.61 on the Nasdaq.

(Reporting by Deepa Seetharaman; Editing by Bernard Orr)

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Comments (3)
elsewhere wrote:
I like Amazon, their service is good and products are priced well, even in the stores run by other who advertise there. What stops me from using them is they are politically partisan from Mr. Bezos down the line.

Jul 24, 2014 5:06pm EDT  --  Report as abuse
AlkalineState wrote:
Amazon posts loss, considers not using appliance boxes to ship hair scrunchies on Amazon Prime.

Streamline, streamline.

Jul 24, 2014 5:59pm EDT  --  Report as abuse
ReadandShare wrote:
No Kindles for me. Don’t like walled gardens — be they Amazon or Apple or…

Jul 24, 2014 6:10pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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