Amazon Profits Fall 96 Percent Despite Rising Sales

Amazon revenues dropped dramatically in the three months leading up to 30 June, according to the online retailer’s second quarter results.

Net income decreased by 96 percent from $191 million (£122 million) in the second quarter of 2011 to just $7 million this year.

Amazon claimed revenues were affected by unfavourable exchange rates and the estimated loss sustained through the acquisition and integration of order fulfilment systems provider Kiva Systems.

Amazon profits

The dramatic decrease in revenues comes despite sales increasing by a third since last year. Net sales rose by 29 percent in the second quarter to $12.83 billion from $9.91 billion last year.

Amazon predicted third quarter sales would be between $12.9 billion and $14.3 billion, which would mean a 19-31 percent increase from the same quarter last year, but anticipated losses to be between $350 million and $50 million. It recorded a profit of $79 million in the third quarter last year.

Amazon has enjoyed great success in the past year with its Amazon Kindle Fire tablet, which still has not been released in the UK, and remains the most popular product in its catalogue. Its success has prompted suggestions that the company is preparing a smartphone.

Foxconn, which manufactures some Apple devices, is reportedly on board for the project, which could use mapping technologies acquired in the takeover of startup UpNext.

Earlier this week, Amazon announced plans to set up a digital development centre in London, where it will employ hundreds of people building web services for smartphones, tablets and PCs.

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