Amazon shares set record after strong quarterly profit

Tue Jan 29, 2013 5:26pm EST
 

By Alistair Barr

SAN FRANCISCO (Reuters) - Amazon.com Inc shares hit a new record on Tuesday after it reported better-than-expected quarterly profit, fueled by the growth of higher-margin businesses during the fiercely competitive holiday quarter.

The world's largest Internet retailer said that its cloud computing services, video content sales and its aggressive expansion in e-books helped increase profitability.

In addition, a growing network of warehouses or fulfillment centers closer to customers held down shipping costs as it vied with Wal-Mart Stores Inc and other major retailers for consumer dollars over the holidays.

Chief Executive Jeff Bezos highlighted the Kindle's e-book business, calling it a multi-billion dollar category that grew about 70 percent in 2012. Its traditional physical book business rose about five percent in the same period, he noted.

"We're now seeing the transition we`ve been expecting," Bezos said in the company's results statement.

Profits have shrunk in recent years as the company invested for longer-term growth, building massive fulfillment centers, developing a Kindle Fire tablet hardware business in competition with Apple Inc, and expanding into Internet-based cloud services.

The fourth-quarter profit results suggested that Amazon may be able to generate attractive returns from such spending, analysts said.

"The fourth-quarter operating income was up more than expected," said R.J. Hottovy, an equity analyst at Morningstar. "This supports the bull case that Amazon can monetize its growth over the longer term."   Continued...

 
A zoomed image of a computer screen showing the Amazon logo is seen in Vienna November 26, 2012. REUTERS/Heinz-Peter Bader