(Corrects that Kindle sales growth rate tripled, not sales, paragraph 9)
SAN FRANCISCO - Amazon.com Inc quarterly earnings fell far short of Wall Street estimates, hurt by a jump in operating expenses as it cut prices on its Kindle electronic reader and other merchandise, sending its shares down 14 percent.
The largest global online retailer had posted blow-out results in its fourth and first quarters, but investors had feared the momentum would stall this spring.
Amazon said its second-quarter revenue rose 41 percent to $6.57 billion, just above the $6.54 billion expected by Wall Street. Total operating expenses rose 40 percent to $6.3 billion, with major increases in its cost of sales, marketing and technology and content items.
BWS Financial's Hamed Khorsand said the rise in operating expenses appeared to have cut profits short in the quarter.
It kind of brings back fears that there would be overspending at Amazon on different operating projects, he said.
Frederick Moran at Benchmark Co said Amazon may have taken a particular hit on discounting merchandise. The online retailer faces greater competition from traditional store chains like Wal-Mart Stores Inc and from Apple's rival iPad device, which also has electronic reading functions.
Net income in Amazon's second quarter rose 45 percent to $207 million, or 45 cents per share, from $142 million, or 32 cents per share, a year earlier.
Analysts, on average, had been expecting earnings of 54 cents per share, according to Thomson Reuters I/B/E/S.
Our operating expenses are increasing year over year related to capacity. We've been growing very, very fast, said Chief Financial Officer Tom Szkutak. He added that the Kindle's sales growth rate had tripled since the company lowered the price of the device.
Amazon forecast operating income in its third quarter to range between $210 million and $310 million -- representing a potential drop of 16 percent to a gain of 24 percent -- on sales of $6.9 billion to $7.63 billion.
Amazon recently lowered the price of its Kindle in light of market competition from the iPad and a cheaper Nook device from Barnes & Noble, and has begun to sell the device in Target stores.
(Reporting by Alexandria Sage; Editing by Gary Hill)