Amazon Releases Q4 2011 Earnings Numbers and Other Interesting Info

January 31, 2012 · 0 comments

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Amazon just released its 4th quarter 2011 numbers. We also get some data about the Kindles, Amazon’s Appstore for Android, and Instant Video, among other things.

Here’s everything in a nutshell (taken directly from Amazon). I’ve linked certain financial terms to their Wikipedia or Investopedia definitions to make the accounting jargon more understandable to normal people.

  • Q4 2011 sales were up 35% (over Q4 2010) to $17.43 billion.
  • Net income (net profit) on that was $177 million. That’s a 58% decrease on net income from last year.
  • Operating cash flow increased 12% to $3.90 billion for the trailing twelve months, compared with $3.50 billion for the trailing twelve months ending December 31, 2010
  • Free cash flow decreased 17% to $2.09 billion for the trailing twelve months, compared with $2.52 billion for the trailing twelve months ended December 31, 2010.
  • Operating income was $260 million in the fourth quarter, compared with $474 million in fourth quarter 2010.

So sales, net income, and operating cash flow increased, while free cash flow and operating income decreased. These numbers missed analysts’ estimates, and Amazon’s stock price fell as much as 11% in after hours trading.

For those of us without degrees in accounting, what does all of this mean? Is Amazon losing its edge after all of thee years as its net income is getting lower and lower?

No. Amazon has been spending money (read: investing in itself and its future) like crazy. The company has been announcing and opening up tons of pricey new warehouses and distribution centers not only in the US, but also across the world. Amazon introduced the Kindle Fire this quarter, and Amazon reportedly sells it at a loss, though it eventually makes money on each one in the long term. The New York Times article Amazon Says Long Term And Means It explains Amazon’s (and founder/CEO Jeff Bezos’s) philosophy as one of long-term sustainability and market domination, not short-term year-on-year profits.

Here’s some more interesting info from the Amazon earnings report regarding non-financial matters:

  • The number of videos purchased or rented from Amazon Instant Video and the number of Amazon Instant Video customers both more than doubled year-over-year in the fourth quarter. In addition, the number of Prime Instant Video streams increased nearly 300% in the fourth quarter compared to the third quarter.
  • During the nine-week holiday period ending December 31, 2011, Kindle unit sales, including both the Kindle Fire and e-reader devices, increased 177% over the same period last year.
  • Kindle Fire is the #1 bestselling, most gifted, and most wished for product across the millions of items available on Amazon.com since its introduction 17 weeks ago.
  • Amazon Appstore for Android customers nearly tripled in the fourth quarter compared to the third quarter.

I think all we can safely say at this point is that it’s really hard to tell how Amazon is doing. Despite our estimates, we don’t know exactly how many Kindle Fires Amazon has sold. We don’t know exactly how much Amazon makes or loses on each one. And we don’t know how the major business decisions we’ve seen in the past 3 months will effect the company later on down the road.

I guess we’ll just have to wait and see.

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