Amazon May Lose Hundreds of Millions, but Things Are Looking Up

Jeff Bezos, CEO and founder of Amazon, at the introduction of the new Amazon Kindle Fire HD and Kindle Paperwhite personal devices, in Santa Monica, Calif., Thursday, Sept. 6, 2012. (AP Photo/Reed Saxon)
Reed Saxon, AP

Amazon just announced another quarter of tiny profits, and says it expects to lose as much as $340 million this quarter. But things are still looking up for the world's biggest online retailer.

First, the good news: Sales for the first quarter rose 22% to $21.27 billion, only slightly below Wall Street's expectations. And its earnings per share for the quarter came in at 18 cents, double what was expected.

The bad news? Amazon still isn't a terribly profitable company. After eking out $97 million in profit last quarter, it reported $82 million in net income this time around. There's a reason CEO Jeff Bezos had to reassure investors this month that his company is not, in fact, a charitable organization.

And that isn't expected to turn around in the immediate future: Its guidance for the second quarter calls for operating income somewhere between a gain of $10 million and a loss of $340 million. Yes, there's a real possibility Amazon could lose a third of a billion dollars for the quarter.

Yet things are looking up for Amazon. Here are a few things working in its favor:

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Its investors don't care about profits. As we recounted last time around, investors are on board with Amazon's consistent sales figures and heavy investments in future growth.

The new Internet sales tax will help Amazon. The Marketplace Fairness Act, which would give states the ability to tax out-of-state online sales, looks poised to clear the Senate this week. The tax would hurt Amazon's smaller competitors, and free up Amazon to build the fulfillment centers it needs to facilitate fast deliveries.

It's aking on Netflix. Amazon wasn't content to be just a bookseller, and it's not content to be just a retailer. Rumors that Amazon is planning a set-top box to stream its Instant Video service drove the share price upwards on Thursday.

Its "cloud" is growing. Amazon Web Services, the company's cloud computing platform, is expanding its reach in the Asia Pacific region.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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