Amazon sees lower operating profit this quarter, shares dip

Thu Feb 2, 2017 10:00pm EST
 
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By Anya George Tharakan and Jeffrey Dastin

(Reuters) - Amazon.com Inc forecast an unexpected dip in operating profit for the current quarter, sending shares down more than 4 percent due to concerns about the costs of investments including new warehouses and video content.

The world's largest online retailer also reported lower-than-expected fourth-quarter revenue and missed Wall Street targets for its closely watched cloud computing unit.

The Seattle-based company is spending heavily to take greater control of package delivery and to expand its video service around the world. Key to its plan is to entice sign-ups for Amazon Prime, its $99-per-year shopping club, which has led to users buying more goods, more often.

"The story is an investment story," said Amazon Chief Financial Officer Brian Olsavsky on a conference call with reporters, noting "stepped-up" spending levels have continued into 2017.

GlobalData Retail analyst Anthony Riva warned of profit erosion.

"Low cost and fast delivery are a fundamental part of Amazon’s appeal to consumers. However, they are also its Achilles' heel," he said in a note.

For years, Amazon has posted roller-coaster results as founder and Chief Executive Jeff Bezos emphasizes building up businesses rather than making an immediate profit. He has sunk profits into new areas that have either built new markets - as with cloud services or its Kindle e-readers - or have floundered, like its Fire Phones.

"Failure and invention are inseparable twins," Bezos wrote in a letter to shareholders last year.   Continued...

 
Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City, January 29, 2016.    REUTERS/Mike Segar/File Photo