ECONOMY DOWNTURN IS A CRISIS FOR AMAZON AS WELL

Updated: 10/23/2008 19:04
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Shares of Amazon.com Inc. dropped 14 per cent to 42.90 USD in afterhours trading as the company issued weak fourthquarter guidance.

Shares of Amazon.com Inc. dropped 14% to $42.90 in after-hours trading as the company issued weak fourth-quarter guidance. Yet the company finds its business to have a "relative strength" in spite of a weak macroeconomic environment.

Amazon reported that net sales for 2008 are expected to be between $ 18.46 billion and $19.46 billion down from earlier guidance indicating revenue would be between $19.35 billion and $20.10 billion.

The progress of Amazon was generally better in the slumping economy environment than that of brick-and- mortar retailers and ecommerce rivals such as EBay Inc. Still experts noted that no company is immune to the global conditions. This year Amazon shares fell 46%.

Net income reportedly amounted $118 million, or 27 cents a share, up from $80 million, or 19 cents a share on a year-over-year basis. The latest quarter benefit was $15 million related to foreign currency.

Net sales increased 31% to $4.26 billion against projected 29% to 36%, to a range of $4.2 billion to $4.43 billion. Analysts expected per-share earnings to be 25 cents on revenue of $ 4.27 billion.

Gross margin remained flat at 23.4%. Owing to its ever-expanding product line, lower prices and free shipping Amazon gained market share from other online retailers and e-commerce companies but analysts note that the expanded market comes at the cost of a narrower gross margin.

Fourth quarter sales are expected to grow % to 23% for a total of $6 billion to $7 billion, while Wall Street estimated 24% growth to $7.05 billion. Besides, the company predicts operating income to amount $145 million to $305 million, down 46% to up 13%.


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