Amazon Earnings Release: Don't Doubt Jeff Bezos

Amazon.com released its third quarter earnings Tuesday, reporting $10.9 billion in global net sales in the third quarter, a 44 percent increase from $7.6 billion in the third quarter of 2010. At the market close, Amazon shares slipped 4.4 percent, more than 10 points, to $227.15, because earnings fell substantially below Wall Street expectations.

Sept. 28 was the biggest order day ever for Kindle, even bigger than previous holiday peak days, said CEO Jeff Bezos. In the three weeks since launch, orders for electronic ink Kindles are double the previous launch. And based on what we're seeing with Kindle Fire pre-orders, we're increasing capacity and building millions more than we'd already planned.

While Bezos did not release any Kindle Fire pre-order numbers, a blog report released on Oct. 4 captured Amazon's internal inventory, revealing that Amazon had sold 250,000 pre-orders in five days, at an average rate of 50,000 units per day. If Amazon has managed to maintain this rapid clip of pre-orders, the company will register more than 2.5 million pre-orders for the Kindle Fire by the time it's released on Nov. 15, which would break all other tablets' launch day sales records.

Amazon reported its best sales in the U.S. and Canada; in fact, North American sales represented more than 50 percent of the company's total net sales in the third quarter with $5.9 billion, a 44 percent jump from last year. International sales also jumped by 44 percent, totaling $4.9 billion.

While Amazon sales skyrocketed the third quarter,net income plummeted 73 percent, from $231 million a year ago to $63 million. The company also expects operating income to decline anywhere between 142 percent and 47 percent in the fourth quarter, or between $200 million and $250 million. This might make some sense, given that Amazon's fast-selling Kindle Fire is more expensive to produce than it is to sell.

It's been a busy few months for Seattle-based Amazon, as it attempts to provide more consumer products to compete with the likes of Apple and Netflix. On Sept. 28, Amazon held a media event in New York city where Bezos announced two new Kindle e-readers, the Kindle Touch and the Kindle Touch 3G, and its first-ever tablet, the Kindle Fire. The products will literally give Apple a run for its money, given that Amazon's e-readers and tablet offering are substantially cheaper than Apple's. All Amazon devices will cost less than $200, and the Kindle Fire's $199 price tag is $300 cheaper than the cheapest Apple iPad.

Amazon has also been building up its video streaming service Amazon Prime, a direct competitor to Netflix, which announced it had lost 800,000 subscribers in its own third quarter earnings. This quarter, Amazon signed agreements with Twentieth Century Fox and PBS, allowing Amazon Prime members to instantly stream titles from those distributors. The Amazon Prime library, according to the company, now has more than 12,000 movies and TV shows from partners like CBS, Fox and Sony.

Amazon has set itself up well for the 2011 holiday season. The company expects revenue between $16.5 billion and $18.7 billion in the the current quarter, or growth between 27 percent and 44 percent over last year..

Pay no attention to Amazon's slipping stock; instead, look at its offerings. Between Amazon's traditional online retail store Amazon.com, its Amazon Publishing arm, its line of Kindle e-Readers and tablets, its new Web browser Amazon Silk and its cloud-based infrastructure Amazon Web Services, Jeff Bezos is laying the framework for his company to be a juggernaut in the consumer media industry. Its third quarter sales may not have been as successful as analysts hoped, but given that the company will soon launch a line-up of cheap touchscreen devices to reel in another $5 billion or $7 billion during the holiday rush, it would be unwise to give up on Amazon so soon.

Amazon will sell the new Kindle Fire tablet for $199 on Nov. 21, five days after the company releases its $99 Kindle Touch and its $149 souped-up Kindle Touch 3G on Nov. 15. The company also reduced the price of its original Kindle to $79, which is available now.