Bezos spending boosts losses at Amazon

SAN FRANCISCO — Amazon.com on Thursday reported its biggest quarterly loss since 2012 as Chief Executive Officer Jeff Bezos builds more distribution warehouses, adds grocery deliveries and develops new smartphones and tablets.

The world’s largest online retailer posted a second-quarter loss of $126 million, wider than the loss of $7 million a year earlier, even as revenue climbed 23 percent to $19.3 billion, matching analysts’ average estimates. Operating expenses increased 24 percent to $19.4 billion.

Bezos’s strategy since Amazon’s inception has been to invest heavily to expand and earn customer loyalty. While the approach has disrupted industries from bookstores and electronics outlets to providers of Web-computing software, it’s been expensive. Amazon began posting quarterly losses in 2012 after being consistently profitable for almost a decade.

“As long as there is money to pour in to the business, they will be pouring money in to the business,” said Sucharita Mulpuru, an analyst at Forrester Research in Cambridge, Massachusetts. “If you can spend down all your profit and nobody is going to penalize you for it, why show a profit?”

Amazon’s lack of profits stands in stark contrast to Alibaba Group Holding, which has better margins and is planning an initial public offering soon. The Chinese Web retailer disclosed in a prospectus in May that its profit totaled $2.8 billion for the nine months ended Dec. 31 on revenue of $6.5 billion. Amazon earned $274 million for all of 2013 on sales of $74.5 billion.

Still, shareholders continue to back Bezos’s view that big investments are necessary to gain share because Amazon’s business opportunity is enormous and will pay off in the long run. Amazon is the second-highest valued company in the Standard &Poor’s 500 Index, trading at 573 times earnings and trailing Vertex Pharmaceuticals Inc.

Looking ahead, Amazon projected sales of $19.7 billion to $21.5 billion for the current quarter. Operating losses are projected to be $810 million to $410 million, Amazon said.

Amazon didn’t give an update on its dispute with Hachette Book Group over digital-book sales. Both are seeking a greater share of e-book income, and Amazon blocked pre-orders for some of Hachette’s books earlier this year, including “The Silkworm,” a new novel by J.K. Rowling, writing under the pseudonym Robert Galbraith.

Bezos is spending to take Amazon further away from its roots as an online seller of books. As it makes that shift, the company is increasingly competing with large technology companies such as Apple, Google, Microsoft and Samsung Electronics.

Amazon is shipping this week its Fire smartphone, a $199 handset that lets users take a picture of a product to find and buy it quickly from Amazon. Reviewers have panned the device, citing a weak battery, lack of applications and the gimmicky nature of its 3-D display.

Still, Bezos has proven with devices such as the Kindle Fire tablet that he’ll stick with a product and continue to invest, even if early models don’t prove popular.

Amazon’s cloud-computing business, Amazon Web Services, is the market leader, used by large companies such as Comcast and General Electric, as well as startups such as Flipboard.

More in Herald Business Journal

Mountlake Terrace-based 1st Security Bank wasn’t traded publicly during the recession, but it has seen a steady growth since the recession. (Jim Davis / HBJ)
How stocks in local banks fared since the recession

Every bank was hit hard during the recession, but most have bounced back in a big way.

Boeing bolsters team for potential 797 with leading engineer

Terry Beezhold has been chief project engineer for the 777X program.

The FCC chairman moves to repeal ‘net neutrality’ rules

His plan would allow internet providers to control broadband speeds and favor their own services.

Tom Hoban
Are millennials warming up to life in suburbia?

They dominate the apartment market and their wants need to be accounted for, says columnist Tom Hoban.

Camano artist mixes flask, paintings for successful cocktail

Art flasks prove popular as bachelorette gifts, birthday presents and wedding favors.

Katie Garrison
New agent joins Re/Max Elite’s office in Snohomish

Re/Max Elite welcomed a new agent to its Snohomish office. Katie Garrison… Continue reading

UW Bothell Pub Talk looks at Greenhouse Gas Mystery

The Greenhouse Gas Mystery is the topic for the next UW Bothell… Continue reading

EvergreenHealth Monroe pharmacy interns travel to Ghana

Earlier this year, University of Washington School of Pharmacy students and EvergreenHealth… Continue reading

Everett Clinic Foundation gives $6,500 to nonprofit Christmas House

The Everett Clinic Foundation recently awarded a $6,500 operating grant to the… Continue reading

Most Read