Amazon released more mind-numbing results for 2010, announcing a number of records and new milestones along with difficult-to-understand statistics. The top line was stellar with total sales for the year up 40%, to $34.2 billion, while net income rose 28%, to $1.15 billion. In a prepared statement chairman Jeff Bezos said the company passed two milestones in the fourth quarter--its first time sales topped more than $10 billion in a quarter with actual sales hitting $12 billion; and “after selling millions of third-generation Kindles during the quarter, Kindle books have now overtaken paperback books as the most popular format on Amazon.com,” even while sales of paperbacks rose.
Despite the big gains for the year, fourth quarter results missed expectations and the company's stock price fell in after hours trading.The company attributed the weaker than expected earnings to continued investment in a number of areas, including infrastructure and technology. Amazon opened 13 distribution centers in 2010, for example, and now has 52.
According to Amazon, since the beginning of the year, for every 100 paperback books Amazon has sold, it has sold 115 Kindle books. Additionally, during this same time period the company has sold three times as many Kindle books as hardcover books, sales that are across Amazon’s entire U.S. book business and includes sales of books where there is no Kindle edition. Free Kindle books are excluded. The Kindle store now has 810,000 books with more than 670,000 priced at $9.99 or less, Amazon said. When pressed for more details on Kindle's performance executives fell back to the usual Amazon lines, saying that its Kindle business and content business is growing very fast and that it remains very pleased with its sales of print books. Executives declined to comment where the weak spot in Amazon's media segment might be if both e-books and print books are selling well. They also skirted the issue if the agency model was placing a drag on sales growth. Amazon did say its strategy when entering new areas is to price products as low as possible, a strategy it will continue to follow.
In a breakdown by segment, worldwide media sales (books, e-books, other content) rose 17%, to $14.9 billion in the year, while electronics and other merchandise (including Kindles) sales jumped 66%, to $18.9 billion. The segment includes acquisitions made during the year.
Amazon sees no slowdown in sales growth, predicting that first quarter revenue will increase between 28% to 39%, although it said operating income is expected to decline, a prediction that spooked investors.