More Records for Amazon; Scrambling to Meet Kindle Demand  

by Jim Milliot -- Publishers Weekly, 1/30/2008 9:46:00 AM

Media sales rose 29% last year in Amazon’s North America media segment, hitting $4.63 billion. Fourth quarter segment revenue jumped 31%, to $1.64 billion, with the company explaining that sales in the period were up in all media segments, which includes books, movies, music, digital downloads, software and video games. Total media sales rose 31% in the year, to $9.24 billion.

Total revenue for the entire company jumped 39% last year, to $14.84 billion, with net income up 150% to $476 million, giving the company a profit margin of 3.2%. Revenue growth was the fastest for the company since 2000. In the question and answer period of its conference call, analysts were clearly frustrated by Amazon’s low margins. Executives said they will continue to focus on free cash flow and that an operating margin of 10% (it was 5.7% in 2007) was possible at some point. Chairman Jeff Bezos said Amazon will continue to try and lower prices while using its scale to improve margins. He said that in some of its newer categories there is a lot of room to get better prices from suppliers, and that even in some older segments (like books), there is room to operate more efficiently.

In terms of the Kindle, Bezos said demand has outpaced expectations and that the company is scrambling to fill orders. He said the company’s goal is to get to a situation where when a customer orders the Kindle an e-book reader can be shipped immediately. Bezos added that Amazon was excited about the “very strong demand” for the Kindle. Asked how the sale of digital downloads of media products will impact Amazon, Bezos said that in the longterm digital sales should be a boon to the e-tailer. While Bezos said that the majority of media sales (including books) are still made in the “physical world” (stores), that will change as the practice of digital downloads spreads and more people turn to digital delivery systems (Amazon).