Amazon focuses on e-book promotion

AMAZON.COM, the world’s largest online retailer, forecast lower second-quarter operating profit than analysts predicted as it builds warehouses and promotes its Kindle electronic-book reader.

Operating income, which excludes taxes and interest, will be $95 million (€65m) to $245m (€165m) this quarter, the Seattle-based company said yesterday. Analysts surveyed by Bloomberg expected, on average, operating income of $369.5m (€252.4m).

Amazon chief executive Jeff Bezos is using the company’s growing cash hoard to build distribution centres, expand online video-streaming services and boost marketing for the Kindle. Spending growth has spurred investor concern that Amazon will erode its profits and valuation.

“Amazon’s margins are likely to remain under pressure,” Youssef Squali, an analyst at Jefferies & Co, said yesterday in a research note. He recommends buying Amazon shares.

Amazon fell $9.80, or 5.4%, to $172.50in extended Nasdaq Stock Market trading.

Sales in the first quarter rose 38% to $9.86 billion, beating the $9.54bn average prediction of analysts in a Bloomberg survey.

Net income was $201m, or 44 cents a share. That compared with 61 cents that analysts predicted.

Amazon more than doubled capital expenditures to $979m last year and will spend about $900m this year as part of its effort to expand warehouses and data centres, according to January estimates from James Mitchell, an analyst at Goldman Sachs.