Amazon posted its earnings for Q3 2012, with net sales increasing to $13.806 billion, but net losses increasing to $274 million. Of the total sales, product sales accounted for $11.546 billion, while service sales accounted for $2.260 billion. Media sales accounted for $4.6 billion, while Electronics and other general merchandise accounted for $8.558 billion.
Jeff Bezos, Founder and CEO of Amazon.com, said:
“Our approach is to work hard to charge less. Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point. And our approach is working — the $199 Kindle Fire HD is the #1 bestselling product across Amazon worldwide. Incredibly, this is true even as measured by unit sales. The next two bestselling products worldwide are our Kindle Paperwhite and our $69 Kindle. We’re selling more of each of these devices than the #4 bestselling product, book three of the Fifty Shades of Grey series. And we haven’t even started shipping our best tablet — the $299 Kindle Fire HD 8.9” ships November 20.”
The earnings release seemed to be focused on targeting the iPad mini more than anything else. Amazon posted a complete comparison of the Kindle Fire and the Kindle Fire HD vs the iPad mini, and tried to skewer it completely in terms of specs and price.
Amazon’s strategy is to sell hardware at breakeven, and make money on digital content sales, as compared to Apple, which makes money on both. So far, Apple is winning in terms of both – device and content sales, as well as profit.
Given the upcoming holiday period, and the recent launch of the Kindle Paperwhite, we expect Amazon to post a loss even in the next quarter.
While Apple’s approach is definitely more lucrative and probably better, there can be only one Apple. Amazon is pursuing the exact opposite route, and is focusing more on sales and market share than profitability in the short term.
On the operational front, Amazon has continued to add more digital content to its platform, and also improved the capabilities of its fulfillment centers.
AWS continues to be one of Amazon’s fastest growing businesses, and probably powers almost half the internet today.
Amazon ended the quarter with $2.98 billion in cash and cash equivalents and $2.268 in marketable securities.
via Amazon – SEC