SAN FRANCISCO — Amazon.com’s expansion of its online retailing and cloud computing businesses has eroded profits. þþþThe building binge of warehouses and data centers sacrificed Amazon’s short-term profits to lift business over the long term, the company said on Tuesday when it released its first-quarter earnings statement. þþIt also said that it had no intention of slowing the spending. þþThe effect of the expansion, along with an uncertain economy, could be seen in Amazon’s second-quarter financial forecast. The company gave a profit outlook that was far from specific but below analysts’ expectations. þþIt said its second-quarter profit, excluding certain costs, would fall as much as 65 percent or as little as 9 percent. þþMeanwhile, Amazon said revenue would rise 35 percent to 47 percent, or $8.85 billion to $9.65 billion. þþThomas J. Szkutak, Amazon’s chief financial officer, explained the wide range by saying during a conference call that “there is uncertainty, so we are making sure to give an appropriate conservative range.” þþIn after-hours trading, Amazon’s shares fell about 1 percent. They had dropped 1.7 percent, to $182.30, in regular trading before the earnings announcement. þþAmazon reported that first-quarter net income fell 33 percent, to $201 million, or 44 cents a share, from $299 million, or 66 cents in the period a year ago. þþRevenue climbed 38 percent, to $9.86 billion, from $7.13 billion. þþNet income was below the expectations of Wall Street analysts. They had expected 61 cents a share and revenue of $9.52 billion, according to a survey of analysts by Thomson Reuters. þþAmazon is undergoing a major expansion this year that calls for adding at least nine warehouses after adding 13 warehouses last year. If growth in customer orders continues, however, it will add even more fulfillment centers, Mr. Szkutak said. þþJeff Bezos, Amazon’s chief executive, was not on the call. þþThe company, based in Seattle, said that sales of books and music during the quarter rose 15 percent, to $3.96 billion. þþSales of electronics and other merchandise grew 59 percent, to $5.59 billion. þþAs usual, Amazon boasted about its Kindle digital book reader but did not provide any specific sales numbers. þþData centers are crucial to its digital music storage service, introduced late last month. Consumers can use the service to back up files from their computers and then gain access to them from a computer, laptop or smartphone. þþAdding data center capacity is especially important for Amazon’s Web hosting service, which stores data for a large number of businesses. þþLast week, after the first quarter ended, the hosting service suffered an embarrassing failure. þþThe glitch, which the company said was fixed on Monday, took down a number of Web sites, including Foursquare, Reddit and Quora. þþAmazon is still looking into the cause, Mr. Szkutak said. þþYoussef H. Squali, an analyst with Jefferies & Company, said of Amazon’s spending on infrastructure, “this is the right strategy longer term but it makes for a stressful stock to own.” Given the potential for growth overseas, he said that Amazon’s expansion could go on for several years. þþAnd, Sandeep Aggarwal, an analyst with Caris & Company, said that Amazon’s profit shortfall relative to expectations and its disappointing guidance were not particularly worrisome. The company is growing quickly, he pointed out, and it therefore needs to invest in its business by building. þþ“We see that as a good problem to have,” Mr. Aggarwal said. þþJapan’s earthquake and subsequent disasters bit into Amazon’s business in the first quarter, reducing operating income by $20 million. þþJapan accounts for up to 15 percent of the company’s business, according to analyst estimates. þþSales in Japan are picking up, Mr. Szkutak said, but they continue to be weak as the country tries to rebuild. þþMeanwhile, analysts expect high gasoline prices in the United States and in other countries to increase Amazon’s shipping costs. þ
Source: NY Times
