July 24--Amazon.com shares tanked in after-hours trading Thursday after the online retail giant posted a second-quarter loss that was larger than
The company blamed the second-quarter red ink in large measure on price competition in its cloud-computing business, Amazon Web Services. That business, known as AWS, cut prices from 28 to 51 percent earlier this year to protect its market-leading position from competition from such deep-pocketed rivals as Google,
Those cuts helped AWS grow its usage by 90 percent, Amazon Chief Financial Officer
North American sales in the "Other" category, which includes AWS results, grew 38 percent in the quarter. In the year-ago period, North American "Other" sales grew 64 percent. Szkutak pointed to the price cuts as the culprit for the slower growth.
"It certainly did impact our [second quarter] results in a meaningful way," Szkutak said.
For the quarter, Amazon reported
Analysts expected the company to lose
Amazon shares fell
For shareholders hoping Amazon might yet eke out bigger profits, the company disappointed them once again. For the third quarter, the company said operating losses should be between
Szkutak pointed to investments the company continues to make in new business opportunities, even at the expense of short-term financial gains. In addition to the AWS price cuts, the company plans to spend to build out infrastructure to support that business, said Szkutak, though he didn't disclose the amount.
Amazon also plans to invest heavily in acquiring and creating original content for its Amazon Prime Instant Video service, which competes against
"We're ramping up the spend," Szkutak said.
He also pointed to increased spending on a new breed of warehouses, called sortation centers, which collect goods delivered from the fulfillment centers where products are located and sorts packages by ZIP codes in order to deliver them to local post offices. Those sortation centers -- of which there will be 15 in
"We're investing on behalf of customers and shareholders," Szkutak said on a conference call with journalists after the results were announced. "It's impacting short-term results."
"What you are likely seeing is some profit-taking, and the unwinding of some high expectations," Sebastian said in an email interview.
Szkutak also noted Amazon's decision in March to increase the price of its Prime subscription service, by
"We're really pleased with the Prime program," Szkutak said. "It's growing really fast."
He also noted that the number of customers converting free trial Prime memberships into paying subscriptions has increased, though he didn't offer details. But those Prime subscribers are more likely to purchase more items than Amazon's non-Prime customers.
"They have great purchasing patterns," Szkutak said. "We're very pleased with what we're seeing there."
Szkutak offered no insight into early sales of Amazon's new Fire Phone, which went on sale Thursday. And he shed no new light on the company's dispute with publisher Hachette, which has objected to Amazon's tactics in negotiating a larger share of e-book revenue.
Amazon also noted that it now has 132,600 employees, up 37 percent in the last year. That's larger than
(c)2014 The Seattle Times
Visit The Seattle Times at www.seattletimes.com
Distributed by MCT Information Services