Amazon Sees 10 Percent Income Drop in Q2

Amazon.com's financial results for the second quarter have come in and the earnings are lower than expected. Revenue was up 14 percent from the second quarter last year, to $4.65 billion, slightly below analysts’ expectations, which estimated Q2 revenue at $4.67 billion. Profits, on the other hand, were down a full 10 percent to $142 million from $158 million last year. However, a recent settlement with toy retailer Toys “R” Us, to which Amazon had to pay $51 million, affected the bottom line which, otherwise, would have been positive.

“We’re pleased that customers saved more than $900 million with our free shipping offers, including Amazon Prime, over the last year,” Jeff Bezos, founder and CEO of Amazon.com, said. “We’re staying heads down focused on providing customers low prices, vast selection, and fast delivery.”

Operating cash flow was $1.88 billion for the last twelve months, compared to $1.09 billion last year, while operating income had a sharp decline by 27 percent year over year to $159 million. Revenue is expected to be between $4.75 billion and $5.25 billion in Q3, an 11 percent to 23 percent growth from Q3 2008.

Amazon's main business is showing decreased performance as the sale of books, CDs and DVDs was flat from Q2 last year and only grew 15.6 percent in 2008. Worldwide it's the same picture, with this type of sales growing only 1 percent. Other segments like electronics and other goods grew by 35 percent in Q2 2009.

The company has been in the spotlight lately a number of times though not always in a positive light. Recent technical problems with its e-book reader, the Kindle, raised a few voices but even more worrying was the removal of several books from the reader after they were found to be sold without proper licensing.

On a more positive note, the retail giant recently acquired Zappos, an online shoe and apparel retailer with a share swap deal worth north of $800 million, the biggest acquisition in the company's 15-year history. The move was received positively by analysts and the market, which saw it as a smart one on the company’s part.