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Amazon profits fell 73% in Q3 whilst sales rose 44%

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Launching the new Kindle Fire e-reader has taken a significant bite out of global e-tailer Amazon.com’s profits during its third quarter, but total net sales still increased 44 per cent during the period.

Results released today show that net income for the company in the three months ending September 30th 2011 declined 73 per cent to $63 million (£39 million), meaning diluted shares were down to $0.14 each from $0.51 in the third quarter in 2010.

Kindle Fire represents a leap forward in e-reader capabilities allowing users to watch movies & TV shows, listen to music, read books & magazines, browse the internet and play games, pushing Amazon’s flagship product into the tablet computer market.

During the period the group also launched new versions of its other Kindle devices with new designs and improved online connectivity.

Jeff Bezos, founder and CEO of Amazon, said: “September 28th was the biggest order day ever for Kindle, even bigger than previous holiday peak days - we introduced Kindle Fire for $199, Kindle Touch 3G for $149, Kindle Touch for $99, and our all new Kindle for only $79.”

“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.”

All of this launch activity helped boost global net sales for the period to $10.88 billion in Q3, up from $7.56 billion during the previous year, whilst sales outside the US, including UK operations, totalled $4.94 billion which was a year-on-year improvement of 33 per cent excluding the impact of favourable exchange rates.

Keeping product prices low will continue to chip away at Amazon’s income over the coming months having invested so much on its new e-readers and the increasing price of shipping has also been hitting its bottom line.

Sales growth is set to slow in the fourth quarter, with an increase in trading the size of that seen in Q3 at the top end of current estimates, and the group is also predicting a possible operating loss for the period with an expected decline in profitability of somewhere between 142 per cent and 47 per cent in the period.

Published on Wednesday 26 October by Editorial Assistant

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