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business newsAmazon Earnings Disappoint Investors
By
Justin Sharon
Jan 28, 2011 3:45 pm
The Web retailer disappointed investors with its earnings and outlook. It projects operating profit of between $260 million and $385 million for the current quarter, with sales now due to come in not much north of $9.1 billion.
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Today, however, its shares are trading more like tech wreck than Internet bubble after the biggest Web retailer disappointed investors with its earnings and outlook. It projects operating profit of between $260 million and $385 million for the current quarter, with sales now due to come in not much north of $9.1 billion. Both were below consensus, calling for $474 million and $9.36 billion, respectively.
Jeff Bezos, having once worked as a financial analyst for D. E. Shaw & Co. before founding Amazon, will know all about how analysts don't like to be disappointed. Sure enough, at least one research downgrade duly followed the news. To be be fair, the company picked an especially bad day to have a bad day with geopolitical concerns in the Middle East sending the overall market sharply lower.
Fourth-quarter profit actually beat Street views at $0.91 on an EPS basis, up 8% to $416 million. However, the stock had previously been priced for perfection and was arguably overdue a pullback. Some skepticism has also expressed, at least on CNBC, that poor weather be partially fingered for quarterly sales coming in shy of the $13 billion predicted. After all, while Amazon may have been named after a rain forest, one would think both its customers and warehouses are each amply sheltered from storms.
Please see Amazon Knows Your Relatives Can’t Buy You Gifts, Amazon and E-Retailers Brace for Google’s E-Book Shop, and Hate Your Kindle? Here’s What You Can Do.
If one were to have predicted that the outfit which pioneered online book selling was imploding on the very day fusty, 40-year-old brick-and-mortar Borders Group (BGP) was surging, people would say you were reading Alice in Wonderland. The logic may indeed be "curiouser and curiouser" but there's no doubt that this Ann Arbor outfit is a stellar performer on an otherwise dire day, its shares up more than 11% as I write.
While bankruptcy still remains a distinct possibility in this Kindle age of ours, the firm has at least received a temporary stay of execution. It comes in the form of last night's $550 million commitment from GE Capital, contingent upon Borders being able to make publishers believe that it is in their best interest to convert late payments into loans.
General Electric (GE), GE Capital's corporate parent, has gotten some of its old mojo back lately, reporting impressive earnings last Friday and scoring an analyst upgrade only this morning. It clearly expects a return on its investment but with even the bookstore's president, Mike Edwards, admitting that the "current environment" surrounding the company remains challenging to say the least, this novel could yet end in Chapter 11.
Also check out Borders’ E-Reader Poses Little Threat to Apple, Amazon and GE Stock Rises After State of the Union Address.
He’s currently otherwise engaged in Davos announcing the commitment of $50 million for early childhood vaccinations, but Microsoft's (MSFT) Bill Gates must be wishing he could also inoculate his company against the sort of early earnings release which bedeviled the tech giant yesterday afternoon. Shares are slumping in tandem with equities almost everywhere, though the numbers were actually quite good.
This stock has essentially been dead money for a decade now while Apple (AAPL) and others have stolen Mr. Softee's thunder, but the Rodney Dangerfield reputation is arguably undeserved. Its newly launched Kinect for Xbox 360 has actually outsold the iPad and its Vista debacle is now comfortably in the rearview mirror.
Hard as it may be to get excited about an erstwhile tech titan for its dividend, Microsoft also now yields a respectable 2.30%. With corporate spin-offs all the rage at present, a bold move like separating its entertainment business -- now 19% of total revenues -- may ultimately make sense. In the meantime the firm continues to perform well in enterprise platforms, so shares may be worth another look at current valuation levels.
Also check out Microsoft’s Stony Silence Doesn’t Bode Well for Windows Phone 7, Google Chrome OS Is Microsoft’s Nightmare, and Where’s All the Kinect Sex?
Sara Lee Corp's (SLE) former CEO Brenda Barnes had unfortunate health issues long before people began noticing Steve Jobs’ declining health or the tragic cancer diagnosis of American International Group's (AIG) Bob Benmosche. It was the saddest of several issues to have plagued one of this country's most iconic consumer goods companies, whose best-known brands also include Hillshire Farm, Ball Park, and Jimmy Dean. The company has undergone about six years of restructuring in a bid to streamline itself and enhance investor value. (Wonderbra was, until 2006, one of the labels it also owned; hardly a synergistic fit given its other brands.) Even so, it's been a long time since stockholders could say "nobody doesn't like" the firm. Shares in the Downers Grove outfit, down 4.75% yesterday, are off again today after announcing it will separate itself into two separate public companies, a transaction expected to be complete early next year.
The dual entities are its North American Retail and Foodservice businesses, a tax free spin-off, plus an as-yet-unnamed outfit comprising its current International Beverage and Bakery businesses, as well as the North American beverage business. Sara Lee has paid dividends continuously for more than 65 years, and it just announced another payout, so investors are admittedly being paid to wait while the turnaround bears fruit. We wish them well, though the wait has thus far been far longer than expected and tested the patience of many investors.
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