Amazon Sales Surge Due To Digital Content And Cloud

Amazon has posted another set of mostly positive quarterly results thanks to growth in the e-commerce giant’s digital content, cloud and retail sectors.

For the first quarter ending 31 March, Amazon posted a healthy 22 percent rise in revenues to $16.07 billion (£10.4bn), compared with $13.2 billion (£8.5bn) in the same year ago quarter.

But that good news did not exactly translate across to the net income figures, which declined 37 percent to $82 million (£53m) in the first quarter, compared with $130 million (£84m) in first quarter 2012. Yet when Amazon’s gross profit margin is taken into account, it shows that the company is becoming more profitable, after it came in at a better-than-expected 26.6 percent, compared with 24 percent a year earlier.

Mostly Positive

The mixed results from Amazon reflect the fact that the company has managed to reduce its shipping expenses and other costs, as well as expand into new business areas such as digital content. However during this last quarter, Amazon also witnessed a growth slowdown in international revenues, reflecting the current state of Europe’s struggling economies.

Digital content seems to be one area that Amazon is very keen to exploit of late. The company is reportedly developing a cheap TV set-top box in a move that will take it into further competition with Apple, which is said to be developing its own television solution.

And last July Amazon announced plans to set up a digital media development centre in London, where it would employ hundreds building interactive Web services across smartphones, tablets and PCs. The importance of digital content to Amazon was underlined in the statement by Amazon’s boss.

“Amazon Studios is working on a new way to greenlight TV shows,” said Jeff Bezos, founder and CEO of Amazon.com. “The pilots are out in the open where everyone can have a say.

“I have my personal picks and so do members of the Amazon Studios team, but the exciting thing about our approach is that our opinions don’t matter,” said Bezos. “Our customers will determine what goes into full-season production. We hope Amazon Originals can become yet another way for us to create value for Prime members.”

New Areas

Amazon of course has made its name by operating as a traditional online retailer, but over the past few years the company has expanded into new areas. It is seeking to directly challenge the might of Apple with its Kindle Fire HD tablet range, and is even rumoured to be working on its own smartphone.

The company also has its own Appstore, and it recently announced plans to expand this to almost 200 countries. While the Amazon Appstore is currently a fraction of the size of Google’s Play store for example, it is achieving notable numbers. In March, according to a new report from app analytics firm Distimo, Amazon’s top 200 paid applications saw 1.6 million downloads and gained $3 million (£1.9m) in one-off fees.

And Amazon is also a giant in cloud computing: Amazon Web Services (AWS) has announced the launch of Amazon Redshift, a fully managed, petabyte-scale data warehouse service in the cloud for a fraction of the cost of a traditional data warehouse.

And just this week Amazon’s CTO Dr Werner Vogels told the AWS Summit that ever-cheaper infrastructure would usher in an age of unfettered innovation. Amazon also continues to follow its usual practice of competing very aggressively on pricing against its rivals. AWS for example has lowered its prices 31 times since it launched in 2006, including 7 price reductions so far in 2013.

Looking Forward

However, one way Amazon boosts its income is by paying as little tax as possible, and that is not at all popular in some quarters. This week a petition demanding that it pay more tax in the UK was delivered to 10 Downing Street. Amazon is one of a number of technology companies whose UK tax arrangements have been questioned. For example it paid no corporation tax at all on its profits in the UK in 2011.

Looking forward, Amazon said that it expects its second quarter sales to be between $14.5 billion (£9.4bn) and $16.2 billion (£10.5bn). This would mean Amazon’s revenues are expected to grow between 13 and 26 percent compared with second quarter 2012.

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Originally published on eWeek.