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Amazon profits dive after heavy Kindle investment

November 10, 2011 By: Dr Search Principal Consultant at the Search Clinic Category: Amazon, Customer Service, Ecommerce, internet, Tablets, Technology Companies, Uncategorized

Profits at Amazon have dropped 73% after the company invested heavily in it’s Kindle tablet computer.Amazon profits dive after heavy Kindle investmentThe company, the world’s largest online internet retailer, said third quarter net income was £40 million ($63 million).

During the period it launched the Kindle “Fire” model, which runs apps and streams films and other non text content.

The results left Amazon shares down 12%.

The company said that sales had grown by 44% and that in September, it had its “biggest order day ever for Kindle, even bigger than previous holiday peak days”.

It now offers four Kindle devices, including a 3G model.

Jeff Bezos, the founder and chief executive of Amazon, said: “In the three weeks since launch, orders for electronic ink Kindles are double the previous launch. And based on what we’re seeing with Kindle Fire pre-orders, we’re increasing capacity and building millions more than we’d already planned.”

Amazon also forecast lower than expected sales for the next quarter, which includes the crucial Christmas period, and said it could even see an operating loss as it continues to invest in the Kindle Fire.

Amazon’s profit margins have generally been lower than other technology firms, a situation that analysts say is now catching up with them.

The Amazon strategic business development plan has always been about selling the technology delivery box at close to cost price and then making future profits from selling the software that runs on the box. Whereas Apple has been more about making a profit from the box and any extra profits from the software is a bonus.

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