Amazon's heavy investing eats into bottom line, shares drop

Thu Jul 24, 2014 10:46pm EDT
 
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By Deepa Seetharaman

SAN FRANCISCO (Reuters) - Amazon.com Inc posted a much larger-than-expected loss in the second quarter as it continues its rapid pace of investment in new businesses such as digital content and consumer electronics.

Amazon's stock price has dropped 10 percent so far in 2014, with investors leery of betting on its long-term growth at the expense of little to no profit.

On Thursday, the shares fell another 10 percent in late trade, after the largest U.S. online retailer posted a loss of 27 cents per share, nearly double Wall Street's average estimate for a loss of 15 cents.

The company also forecast an operating loss of between $810 million and $410 million for the third quarter ending in September, a sharp increase from a loss of $25 million a year earlier.

Amazon is investing heavily in new businesses and hardware products, as it prepares to take on major tech rivals from Apple Inc and Google Inc to Netflix.

Chief Financial Officer Tom Szkutak said Amazon had a "tremendous amount of opportunities" and its investments were "certainly impacting short-term results."

The company is spending more than $100 million on original video content in the third quarter, a substantial increase compared to last year and the second quarter, Szkutak said.

"We're going to continue to invest on behalf of customers with the understanding that long-term has to come," he said during a call with reporters. "We'll obviously be looking to get great returns on investor capital and high amounts of cash flow.   Continued...

 
A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. REUTERS/Rick Wilking