Around the Net

Amazon Shares Fall After 2Q Disappointment

Heavy research and development expenditures cut into Amazon's net income in the second quarter. The online retail giant lost $30 million in net revenue year over year, earning $22 million for the quarter. Net income and revenue figures fell short of analysts' estimates, and a tough outlook for the near future sent shares down 15 percent before the start of today's trading, reports Business Week. The fall was bad, but not as bad as the 22 percent hit Yahoo's stock suffered as a result of missing analysts' estimates. Amazon lowered expectations for the third quarter, citing the heavy impact of R&D spending on the company's margins. Where is that money going? Amazon is expanding its sales offerings in a number of sectors--particularly toys, after terminating its contract with Toys R Us. Losing that contract cost the company $20 million in the second quarter. It's also looking to expand into new areas, which CFO Tom Szkutak says "is going to be expensive short-term." He said third-quarter revenue would be between $7 and $42 million, which would represent a year-over-year decline of between 87 percent and 24 percent. With such a huge margin for error, it's unlikely Amazon will miss its third-quarter estimates. Analysts expressed their frustration during the earnings conference call, asking how CEO Jeff Bezos could be certain the investments in groceries and toys would be worth it. He said it would continue to pay dividends 10 years from now. How will short-term investors respond?

Read the whole story at Business Week »

Next story loading loading..