Amazon Feels The Profit Squeeze
Just to follow up, Amazon has released their numbers. As expected, net income doesn’t look great — $177 million, down 58 percent year over year. But at least it’s not a loss (which Amazon had warned it might be).
That $177 million is on sales of $17.4 billion. Crazy. That’s what low margins — and selling hardware at a loss — will do to you.
Speaking of 177, that’s also the percentage that Amazon says Kindle sales increased during the holiday period when compared to the previous year — which means basically nothing since Amazon refused to release actual numbers last year. And they still refuse to this year.
Looking forward, Amazon expects profit to be anywhere from $100 million — to a $200 million loss next quarter. Ouch.
To be fair, unlike my earlier statement, Amazon did make more money in the entire quarter than Apple did in one day last quarter, but just barely: $177 million versus around $145 million.
But that’s an average. I’m sure during some of the busy shopping days, Apple actually did make more money in one day than Amazon did for the entire quarter.
Amazon’s profit for all of 2011 was $631 million. As a reminder, Apple made $13.06 billion in profit last quarter. Perhaps not a fair apples-to-apples comparison, but not exactly apples-to-oranges either.
Amazon’s December Kindle Sales: Somewhere Between 4 Million And Infinity
This is beyond ridiculous now. Amazon continues to feel the need to boast — and it seems understandably — about their Kindle sales. But they continue to refuse to give actual sales numbers to back up the boasting.
The latest press release says that “Throughout December, customers purchased well over 1 million Kindle devices per week.” For you non-math majors, that means Amazon has sold at least 4 million Kindles (well, perhaps just 3 million as December isn’t quite over yet, but we’ll give them the benefit of the doubt).
This is an improvement over “4x of great”, but it’s still oddly obtuse.
Who knows what “well over” means, I imagine it’s not 2 million, or they’d presumably say that. But who knows? It’s a number definitely south of infinity — I think.
It’s also worth noting that the 1 million+ per week number is spread across the entire line — Kindle Fire, Kindle Touch, and the regular Kindle. Amazon says that their sales figures are in that order, but the number everyone wants is the Kindle Fire sales so they can compare it to other Android tablets. And of course, the iPad.
The latter may be exactly why Amazon continues to skirt around actual numbers (while getting a bit more specific each time). Let’s assume the Kindle Fire doesn’t quite make up 50% of the 1 million+ per week Kindle sales (though again, who knows). Let’s say it has been selling at the rate of 500K units a week. That’s 2 million sold in December. The iPad likely killed that number. It may have beaten that number on one of the big single shopping days alone.
I view the Kindle Fire and the iPad as different devices and so do many people. But as tablets, they’re inevitably going to be compared. And I think it’s fair to think that many people bought one instead of the other this holiday season. With that in mind, Amazon probably wouldn’t want to release concrete numbers that get blown away by a competitor. Especially when the competitor is selling their device for $300 more.
So kudos on your vaguely awesome sales Amazon. I bought a Kindle Touch and I love it. I’m sure the other 100,000 to 2 million customers that bought one feel the same.
4X Of... "Great"?
Amazon issued a press release this morning to say that Black Friday was their best ever in terms of Kindle sales. In fact, they were up 4x over last year. Wow, right? But there’s still that one pesky little problem.
Amazon’s VP of Kindle, Dave Limp:
Even before the busy holiday shopping weekend, we’d already sold millions of the new Kindle family and Kindle Fire was the bestselling product across all of Amazon.com. Black Friday was the best ever for the Kindle family - customers purchased 4X as many Kindle devices as they did last Black Friday - and last year was a great year.
Okay, so Amazon’s stated sales are 4X of “great”. But hey, at least we did get them to say “millions” — that’s progress.
I do not understand why Amazon refuses to release actual numbers when it comes to the Kindle. Actually, I would be fine with it, except for the fact that they issue press releases touting sales numbers… without giving actual sales numbers!
By most estimates, sales of the Kindle — including the new Kindle Fire — are indeed great. I bought a new Kindle Touch, I love it. So why the charade?
Q:You mentioned that you bought a Kindle Touch. Did you go with the 3G model? Just curious..
Anonymous
Nah. I have a 3G Kindle right now (2nd generation), I rarely use the 3G — just to download new books and sync occasionally. And I only ever use it because that device didn’t have an option for WiFi at the time.
Paying an extra $50 for 3G seems silly (though it is a good deal if you’re going to use it a ton since there is no monthly fee, obviously). The bigger issue though is that 3G drains battery life much quicker. That’s the big reason I turn it off by default on my current model.
Kindle Fire Reviews
The Kindle Fire reviews are pouring in. Overall, the consensus seems to be that the device is very solid for the $199 price.
But with that low price point come trade-offs. So no, it’s not an “iPad killer”.
I haven’t played with one yet (aside from a near-complete prototype a few months ago), but I’m gonna hold off on getting one for now. Why? Because I’m fairly certain that Amazon will have a better one out there soon — maybe just a few months from now.
I did just put in my pre-order for a Kindle Touch though. My Kindle was three years old and accumulating fingerprints from the number of times I tried to turn the page by touching the screen. It was time for a change.
The most interesting aspect of the Kindle Fire remains Android. This is going to quickly become the most popular Android tablet on the market. But it doesn’t look like Android at all. Google’s fingerprints are nowhere to be found.
Google can say all they want about how that’s a “win” for the ecosystem and for “open” — but this has to piss them off.
The Key Difference Between Apple And Amazon Will Be Seen Next Quarter
Amazon is predicting record Kindle sales next quarter, just as Apple is predicting record iPhone and iPad sales next quarter. But there’s one key difference.
As a result of those record sales, Apple could see a $40 billion quarter in terms of revenue — that will undoubtedly lead to record profit. Meanwhile, Amazon, even with record sales, is warning that their numbers could dip. They may even lose money next quarter. Possibly a lot of money.
Apple is going to set records for their two most financially successful products. Amazon is going to set a record for a product that they may actually lose money selling.
Apple and Amazon play in the same general space now, but they play in that space in the exact opposite way of one another.
Apple’s model clearly works in this space. Amazon’s model? We’ll see. Remember, they’ll be competing with Apple on the price of much of their digital content as well.
The ability to upsell Amazon Prime may end up being the key here…
Update: And a good follow-up tweet from Michael DeGusta:
…and next quarter Apple will actually report their iPhone/iPad sales while Amazon will not report their Kindle sales.
Amazon has never reported actual Kindle sales numbers in their earnings statements. It’s very odd. They always talk about setting sales records, but they refuse to back those claims up with any actual data. It’s like bragging you’re the best at something but when asked why that’s the case, you respond with “just because”.
Maybe Amazon will change this odd trend and actually report tangible numbers in the holiday quarter.
Update 2: As a few have pointed out, the wording in The Next Web’s post is a bit confusing. They talk about decreases in revenue, but it would seem they actually mean net income (with revenue growth not quite lining up with record sales growth). I’ve tweaked my wording to make this more clear.
As always, profit is the key here — it’s the money you get to keep. Again, with their record revenue, Apple will undoubtedly also see record profit. But with their own massive revenue, Amazon may actually lose money next quarter. Their release indicates that Q4 income could be anywhere from a $250 million gain to a $200 million loss! Think about that for a second. That’s pretty crazy.
Marco Arment Reviews The $79 Kindle
His main takeaway? It’s cheap — both in price and in quality.
As someone who still has a Kindle 2, I had been debating getting this. But I’ll now wait to see the reviews of the Kindle Touch in November.
I suspect it will be largely the same device just with a (shitty) touch screen. Still, I find myself trying to turn the page or highlight something on the Kindle 2 by touching the screen all the time now.
I sort of wish Apple would make an e-ink reader. They won’t — there’s a reason Amazon is getting into the backlit tablet space after trashing it for the past two years — but I would love to see their take on the space.
I love iBooks on the iPad, and especially on the iPhone. It’s a beautiful reading experience in every way except one. And it’s the big one. The backlit screen.
On Fire
Looks like I nailed most things about the Kindle Fire, including the name, ship date, and details. I was a little off on the price though. At first, I heard $249 — then I said it was in flux a few days ago. $199 is very impressive and even more aggressive.
Put simply: this is going to be the Android tablet that people buy. But most people will have no idea that it’s an Android tablet.
The Nook Color is compelling as well, but it lacks two very key things: Amazon content and Amazon.com. Expect to hear more from Barnes & Noble any day now.
Amazon's Inevitable Android Tablet
We first reported on this as a rumor (from a great source) last September. Now it looks like it’s definitely happening this October.
It will be a 9-inch tablet with a color touchsceen (obviously). But the key element is that it will run Google’s Android OS. Remember, Amazon now has a competing Android app store to Google’s own — but it’s a pain in the ass to install. Now it will undoubtedly come pre-installed on these devices. This move was inevitable and could be huge.
Interestingly, it apparently won’t have a camera. Nor will Amazon design it. This worries me a bit, but it seems like they may be aiming to make this thing as cheaply as possible.
Also important: this new tablet will not replace the Kindle. Amazon will also launch two new Kindle varieties around the same time. One will be cheap (probably below the $100 threshold), the other will have a touchscreen (to match the new Nook). But both will still be black & white.
The fall is going to be very interesting. There’s a reason Apple wants to get another iPad out there before the end of the year.
iHear iBooks?
The latest version of iBooks apparently has a read-aloud feature — which is awesome. But I wonder: does it work for all books? Wasn’t this a huge issue with the Kindle? I recall loving that feature, then Amazon essentially killed it after publishers complained.
Q:Do you think it's even important for Amazon to fight for iOS users if Android is half the market now and Apple is unwilling to let Amazon in?
For e-books, it’s important. Especially for the iPad. But bigger picture, not really given what it looks like Amazon is doing. They’ll fight for and take some would be Google Android users over to their own Amazon Android ecosystem. Cannot wait to see how that plays out.
Amazon Probably Sold A Few Kindles This Past Quarter. But No One Knows For Sure.
Still find it a bit odd that Amazon does not release their actual Kindle unit sale numbers. The product is clearly a huge hit — what are they worried about?
Are they concerned people will figure out what poor margins they make on each device sold? Or that they’ll be overwhelmed by tablet sales numbers soon — or already?
This Businessweek story from December cites people “aware” of the sales numbers saying that 8 million Kindles were sold in 2010 (up from 2.4 million in 2009). Apple sold just shy of 15 million iPads in 2010. Some are projecting them to sell 40 million this year.
Obviously, you could make the argument that two aren’t directly comparable. But maybe Amazon knows that the press would definitely rush to compare the sales numbers between the two. And the Kindle would look weak in comparison…
