Financial News

  • 28 July 2014, 1:09

Amazon Bleeds Value After Posting $126m Loss

Amazon's strategy of putting investment ahead of profits prompted a further share sell-off in after-hours trading last night, when it emerged losses deteriorated in its last quarter.

The internet retailer's costly shift towards digital content and consumer electronics businesses was a key factor behind its net loss of $126m (£74.1m) - double what analysts had been expecting.

The figure compared to a loss of $7m in the same period a year earlier.

Total operating expenses rose 24% to $19.36bn on revenues of $19.34bn - which themselves represented an increase of 23%.

Shareholders - who have long been frustrated by Amazon's focus on growth over profit - registered their protest through a 10% fall in its share price.

It meant that Amazon's value had plunged 20% during 2014 to date at a time when many world indices are at record highs and there was no sign that the company - the largest online retailer in the US - would change tack soon under the leadership of its chief executive Jeff Bezos.

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

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

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

He disclosed that the firm was spending more than $100m on original video content in the third quarter alone.

He continued: "We're going to continue to invest on behalf of customers with the understanding that long-term has to come".

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, which makes its US debut on Friday.

Amazon also continues to spend billions of dollars expanding its fulfilment centres, or warehouses, across the world.

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