Amazon Profit Drops in Q4 2011 Earnings Report

Amazon released its fourth-quarter earnings from 2011 today, showing off its massive holiday success with e-readers and its Kindle Fire tablet, yet still missing previous estimates.

Amazon reported a 35 percent increase in net sales from $12.95 billion in Q4 2010 to $17.43 billion in Q4 2011. Despite the increase, the company missed Bloomberg analyst expectations of $18.3 billion.

Amazon also saw a 58 percent drop in quarterly profit from $416 million, or 91 cents per share, in Q4 2010 to $177 million, or 38 cents per share, in Q4 2011.

Amazon reported $260 million in Q4 2011 operating income, down from $474 million in Q4 2010. Operating cash flow increased 12 percent to $3.90 billion, up from $3.50 billion in 2010, and free cash flow fell 17 percent to $2.09 billion from $2.52 billion in 2010.

The online retailer ended Q4 2011 with 56,200 employees, which is a 67 percent increase from Q4 2010.

For the full-year 2011, net sales jumped 41 percent from $34.20 billion in 2010 to $48.08 billion in 2011. Operating income fell 39 percent to $862 million from $1.41 billion in 2010, and net income dropped 45 percent to $631 million ($1.37 per share) from $1.15 billion ($2.53 per share) in 2010.

While Amazon’s first entry into the tablet arena, the Kindle Fire, was wildly successful with both Fire and other Kindle e-reader unit sales increasing 177 percent during the nine-week holiday period ending December 31, 2011 from the same period in 2010, the products were clearly slow to pay off. Increased spending on the Kindle Fire as well as other new products and facilities put a dent in the company’s profits.

“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe,” said Jeff Bezos, founder and CEO of Amazon.com. “Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold.”

Amazon predicts its Q1 2012 revenue to land between $12 billion and $13.4 billion with a $200 million operating loss and $100 million operating profit. Analysts were hoping for a Q1 2012 revenue of $13.41 billion.