Online retailer Amazon.com has good news for the tech sector at a time when technology businesses are cutting profit forecasts, announcing massive layoffs, and eliminating future investments.
The Seattle-based company reported solid fourth-quarter sales Thursday and said profits for the quarter surpassed the company's estimates -- showing that Amazon.com is passing rival eBay on the path to growth.
Net sales for the quarter increased 18 percent to $6.7 billion in the fourth quarter, compared with $5.67 billion in the same quarter of 2007. Not including the $320 million impact from year-over-year changes in foreign-exchange rates throughout the quarter, sales would have grown by 24 percent compared to the same quarter in 2007, according to the company. Income for the quarter was up nine percent to $225 million from $207 million a year ago.
Leading the Pack
Amazon used the economic conditions and recession to woo holiday shoppers by offering shipping promotions and low pricing. The strategy worked, and Amazon reaped the benefits of its biggest holiday season in history, according to Amazon CEO Jeff Bezos.
Strong demand for the Kindle, Amazon's electronic book reader, also didn't hurt, according to Bezos, who said he was "grateful" for the demand.
In fact, as of Friday afternoon the Kindle was completely sold out "due to heavy customer demand." Users, however, were encouraged to reserve a place in line by placing their order anyway.
While online auction house -- and Amazon rival -- eBay has had great success since its launch in 1995, this quarter it turned in the other direction.
eBay suffered from the recession with a bleak holiday season and quarterly revenue decreases for the first time in its history. eBay reported $2.04 billion in fourth-quarter revenue compared to $2.18 billion in the same quarter last year.
John Donahoe, eBay's chief executive and president, said the holiday season was "tough" and "competitive."
Amazon plans to continue its momentum by offering additional promotions during the recession. Amazon expects net sales for the first quarter of 2009 to grow between nine percent and 19 percent, or between $4.525 billion and $4.925 billion. Continued demand for the Kindle should help Amazon's bottom line, as revenues for e-reading devices are expected to increase by 110 percent in 2009, according to Steve Kidera of the Consumer Electronics Association.
eBay also sees a bright future, according to Donahoe, who said the company will make significant changes and will build a stronger e-commerce portfolio while managing the business "prudently in the continued challenging environment." eBay expects net revenues in the range of $1.8 billion to $2.05 billion.