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Amazon earnings are out and the company grew revenue but shrunk profits — a very Amazonian talent. So investors and analysts — who did not, surprisingly, punish the stock — piled on the earnings conference call to get the scoop on how and why.
Only, CFO Tom Szkutak wasn’t really there to answer questions.
Is Kindle profitable?
What are attach rates on Kindle, an analyst asked, wondering if Amazon was selling covers or bags, as well as digital content to fill up the Android-based tablets. After all, if Kindles are being sold at a loss, Amazon needs to sell digital revenue to replace the missing dollars.
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“We have a multi-billion-dollar ebook business,” answered Szkutak in part, parroting the already-available press release. But he did add very helpfully that Amazon is “seeing good progress … but I can’t give specific numbers …”
Later in the call, when another analyst requested data on how Kindle is impacting Amazon’s overall gross margins, Szkutak simply refused to answer.
What’s up with Amazon Prime?
How is Amazon Prime doing, asked another analyst, seeking substantive information about Amazon’s “free” two-day shipping program, which costs $79 a year and also allows access to streaming movies and TV shows.
“The percentage of Prime customers has gone up,” Szkutak responded, vaguely. “We’ve launched a number of new services on the music side … the business is making good progress, but it’s still very early.”
How much does Amazon make from advertising?
Amazon seems to have buried Amazon Web Services revenue in a “Supplemental Revenue – Other” category, which includes Advertising Services and Co-branded Credit Cards … all of which makes perfect sense, of course. Credit cards and the cloud, side by side at last!
So an analyst asked how much Amazon made from advertising — an interesting question, because some product pages on Amazon’s site carry third-party advertising.
“Amazon Web Services revenue is growing very fast,” Szkutak replied, obliquely. “Some marketing services … is part of that revenue category.”
It would also be interesting to know precisely how fast AWS is growing, but unfortunately Amazon has obscured that number by including co-branded credit cards in the same revenue category. This couldn’t be intentional, could it?
What’s up with LivingSocial?
Amazon has been slowly reducing its investment in LivingSocial, another analyst mentioned. Would that continue, and what are Amazon’s plans with regard to daily deals?
“There’s not a lot I can specifically talk about as it relates to LivingSocial,” Szkutak unsurprisingly said. “But local is an interesting opportunity … a long-term opportunity,” he mentioned. Then in a weak moment of helpful clarification, he added that “we think about it over a long-term horizon.”
I mean, I’m aware that companies want to release only the information that puts them in the best possible light. And I’m aware that companies don’t want to release information that will be of competitive value rival firms. But as a public company, it’d be nice to see a little more openness from the largest online retailer in the Americas.
And guess what: if you’re an Amazon investor, it’s kind of critical to know how much the company is sinking into providing Kindle devices at or below cost, and how it intends to recoup the cash. It’s material to how you view the stock, and how you value it.
Note to self: skip the next Amazon earnings call.
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