Amazon.com's earnings, but not its revenue, exceeded Wall Street's expectations in the fourth quarter ended Dec 31, 2005.
The giant online retailer on Thursday reported revenue of US$2.98 billion, an increase of 17 per cent over 2004's fourth quarter and below the consensus expectation of $3.08 billion from financial analysts polled by Thomson Financial.
Net income came in at $199 million, or $0.47 per share, way above the consensus expectation of $0.21 per share. But net income fell sharply compared with the $347 million, or $0.82 per share, Amazon earned in 2004's fourth quarter.
Company executives acknowledged in a conference call that the company's expenses were increased "significantly and deliberately" in 2005, and in particular in the fourth quarter. Costs rose as the company invested more in technology, such as hiring software developers and computer scientists, an area in which Amazon plans to continue increasing expenses in the coming year.
Amazon also poured money into new ventures, such as its A9 search engine, and into new customer programs, such as Amazon Prime, they said. Amazon Prime, in which customers pay a $79 annual flat fee to get unlimited two-day shipping at no additional cost, has been "very expensive" but is expected to yield positive business results in the future, they said. This is because Amazon Prime members tend to buy a wider variety and higher quantity of products, they said.
Amazon's North America revenue, generated by the US and Canada stores, increased 21 per cent to $1.68 billion while international revenue, brought in by the UK, Germany, France, Japan and China stores, grew 13 per cent to $1.29 billion.
For the full year 2005, revenue grew 23 per cent to $8.49 billion but net income fell to $359 million, or $0.84 per share, compared with $588 million, or $1.39 per share, in 2004's fourth quarter, the Seattle-based company said.
Amazon expects revenue to be in the range of $2.14 billion to $2.29 billion in the first quarter of 2006, which would mean growth of between 13 per cent and 20 per cent. For the full year 2006, it expects revenue in the range of $9.85 billion to $10.45 billion, an increase of between 16 per cent and 23 per cent.
At press time, Amazon's stock (AMZN) was down 8.05 per cent to $39.30 in after-hours trading.