Despite strong sales of its Kindle devices during the holidays, Amazon.com's fourth-quarter earnings report missed expectations Tuesday, sending the online retail giant's shares plunging in after-hours trading.
The Seattle e-commerce company said its sales rose 35% year over year, to $17.4 billion for the three months ended Dec. 31. But Wall Street analysts had expected sales to rise 40%, to $18.3 billion, according to AllThingsD, which cited FactSet Research.
Meanwhile, profit plunged 58% to $177 million, or 38 cents a share, as Amazon continued to spend heavily on development and infrastructure to support its Kindle business and other costs. That was compared with profit of $416 million, or 91 cents, in the year-earlier period.
Amazon, which reported its results after the markets closed, saw its shares quickly fall more than 8.5%, to $177.90, in after-hours trading.
Jeff Bezos, Amazon's founder and chief executive, said "millions" of customers purchased Kindle devices over the holidays, making it the company's best-selling item in the U.S. and Europe. During the nine-week holiday period ended Dec. 31, sales of Kindle e-readers and Kindle Fire tablets increased 177% over the same period last year. The company didn't release exact device sales.
For the first quarter, Amazon projected sales of $12 billion to $13.4 billion, up 22% to 36% compared with the first quarter of 2011.
The company will hold a live webcast at 2 p.m. PST to discuss the earnings report.
When asked if the emergence of new, lower-cost tablets was affecting the success of the iPad this week, Apple Inc. Chief Executive Tim Cook said he wasn't seeing it.
"I looked at the data, particularly in the U.S., on a weekly basis after Amazon launched the Kindle Fire, and I wouldn't -- in my view there wasn't an obvious effect on the numbers plus or minus," Cook said.
But one clear minus was Apple's declining share of the growing tablet market. Despite gang-buster sales last quarter, the iPad has lost more than 10 percentage points of market share to rival Android tablets since the fourth quarter of 2010, according to a new report from research firm Strategy Analytics.
The iPad dropped to 57.6% of the tablets sold during the most recent fourth quarter, from 68.2% a year earlier, while Android rose to 39.1% from 29.0% a year ago, the report said. While Apple shipped 15.4 million iPads during the quarter, Android makers shipped 10.5 million tablets, more than tripling the 3.1 million they shipped a year earlier.
The Android surge was led primarily by tablets from Amazon and Samsung, according to Strategy Analytics' Neil Mawston.
"Android is so far proving relatively popular with tablet manufacturers despite nagging concerns about fragmentation of Android’s operating system, user-interface and app store ecosystem,” Mawston wrote in a release attached to the report.
The report also noted that global tablet shipments rose to 66.9 million units in 2011, nearly quadrupling the 18.6 million shipped in 2010. Devices "shipped" are those that manufacturers sell to retailers, and do not always represent final consumer sales numbers, especially when tablet makers overestimate the demand for their products. But Mawston said the tablet shipment numbers in this case were a fair representation of the number consumers bought.
Remember when seeing an iPad on a bus, an airplane or the subway was a startling new experience? Now you might be startled not to see one.
Over the holidays, so many people bought tablets for each other (and, presumably, themselves), that U.S. tablet ownership nearly doubled among adults, to 19% in January from 10% a month earlier. The rate is growing quickly: In May 2010, shortly after the debut of the iPad, only about 3% of consumers over age 16 owned tablets, according to survey information from the Pew Internet & American Life Project.
The survey found a similar jump in e-reader ownership, as prices dropped below $100 for electronic book readers from Amazon and Barnes & Noble. Nearly 20% of U.S. adults now own an e-reader, up from 10% in November.
Tablet and e-reader adoption continues to grow quickly just as sales of traditional personal computers slow and even decline. In the U.S., PC sales last year had their worst year since 2001, dropping nearly 5% compared with 2010, according to research firm IDC. Analysts and PC industry executives regularly cite the increasing popularity of tablets when talking about the slowing growth of the PC businesses.
According to the survey, tablet adoption is now the highest among wealthier and more educated buyers. About 36% of those making more than $75,000 a year own a tablet computer, compared with about 16% of those making $30,000 to $50,000, although ownership rates in both groups appear to be growing quickly. The discrepancy is also substantial between college graduates, 31% of whom own tablets, and high school grads, at 15%.
Haven't gotten that holiday shopping wrapped up just yet? Amazon.com, the world's largest online retailer, has plenty of stuff to sell and on Thursday launched a Best of Digital store full of items it recommends.
As the name would suggest, the items for sale in Amazon's Best of Digital store aren't physical goods. The store, which is a section of Amazon's website, has for sale mp3 music files, not CDs; downloadable movies, not DVDs or Blu-ray discs. Apps, games, magazines, e-books (for Amazon's Kindle e-reader, of course) and software for home PCs are on the list as well.
Launching such a store after the start of Hanukkah and so close to Christmas might seem like odd timing, but "historically, Christmas Day is the largest day of digital sales on Amazon.com, followed by Dec. 26," Amazon said in a statement.
"Last year, from Christmas Eve through Dec. 30, Amazon customers purchased over three times more digital content, including Kindle books, magazines, movies, TV shows music, and digital games as compared to the weekly average for the year," the company said.
Not at all a coincidence, all the digital items (except for the PC software) for sale in the Best of Digital store can be read, watched, listened to, played and used on Amazon's new Kindle Fire tablet.
"With the introduction of Kindle Fire this season, millions more customers will be shopping for new digital content," Craig Pape, Amazon's director of music, said in the statement. "This year we're making it easier and more convenient than ever to get all the content they want."
Amazon updated its Kindle Fire software and iPhone and iPad apps this week, adding new features all around.
For the Kindle Fire, Amazon's first tablet and a hot-selling item, the update promises to improve the responsiveness of touch navigation and the speed of actions on the device, such as loading webpages in the Fire's Web browser.
However, the biggest new feature might be the ability for users to edit what shows up in their "carousel" of recent apps and content displayed on the Fire's home screen.
Before the update, a Fire user couldn't remove any items -- books they've read, games and music played, movies watched or websites visited -- in their carousel.
The ability to remove items from the carousel was a highly requested feature and in this case, Amazon was pretty quick to deliver -- the Fire was released Nov. 14.
The iOS Kindle app updates the user interface for periodicals and text books, with access to the same selection of more than 400 magazines and newspapers that are offered on the Fire, Amazon said in a statement.
For the first time, Amazon is also offering "print replica textbooks" to iOS Kindle app users, which allow for full-color pages and the ability to zoom in and out or take notes as needed, the company said.
And the update also now makes the Kindle iOS app a PDF reader as well, Amazon said, which will allow users to view their own documents -- a feature offered by iBooks for some time now.
For the third week in a row, Amazon has sold more than 1 million Kindles a week. During that time, sales of its Kindle Fire tablet have increased week over week, the e-commerce giant said Thursday.
Amazon said its first tablet, the $199 Kindle Fire, is the bestselling, most-gifted and most-wished-for product on the website.
Dave Limp, vice president of Amazon's Kindle division, said the Seattle-based company was building "millions more" tablets to meet the high demand and noted that demand was accelerating.
Kindle's family consists of the Amazon Fire, the $79 Kindle, the $99 Kindle Touch and the $149 Kindle Touch 3G.
"Our family of Kindle e-ink readers are close behind Kindle Fire on the Amazon.com bestseller list," Limp said. "Customers continue to report preferring their Kindle e-reader for long-form reading, and in fact we've seen many customers buy two Kindles –- both a Kindle Fire and a Kindle or Kindle Touch –- this holiday season."
This week, Amazon said it would provide a software update to Kindle Fire owners that will fix some of the tablet's issues, such as a finicky touch screen. The company said it would release the over-the-air update in less than two weeks.
Amazon.com has confirmed that it will roll out a software update to its bestselling but criticism-plagued Kindle Fire tablet.
A spokeswoman for the Seattle e-commerce giant said the update would be available in less than two weeks and would improve performance and touch navigation. It will also give customers the option to edit what items display on their carousels -- a landing page that shows what users have been up to on their tablets. Currently, all recent activity -- including books read, games played, television shows watched and websites visited -- are shown on a user's carousel.
"Kindle Fire is the most successful product we've ever launched –- we've already sold millions of units and we're building more to meet the strong demand," Amazon spokeswoman Kinley Pearsall said Monday. "As with all of our products, we continue to make them better for customers with regular software updates."
The Amazon Kindle Fire was released last month amid speculation that it would become an "iPad killer." But early reviews for the 7-inch tablet have been mixed, with users complaining about the small screen size, lack of external volume controls, finicky touch screen and lack of privacy. Some tech analysts have said Amazon's tablet effort was not good enough and expect the company to release a better version within months.
Nonetheless, research firms have estimated that the Kindle Fire will become the No. 2 bestselling tablet globally behind Apple's iPad in the fourth quarter, thanks to its $199 price and Amazon's trusted brand name.
Amazon's Kindle Fire is reportedly due for its first software update, partly in response to complaints about the performance of the hot-selling new tablet.
The retail giant, which has in the Fire a sales hit, is looking to improve the Web-browsing speed of its first tablet, among other things, according to a report from the New York Times.
"In less than two weeks, we’re rolling out an over-the-air update to Kindle Fire," Amazon spokesman Drew Herdener said in the report.
As well as the speed of its Silk Browser, the software update should improve the responsiveness of the Fire's multitouch navigation and users will also be able to edit the Carousel of recent items they've used on the device, the New York Times said.
The Fire's last software update came about a month ago and since the Fire first shipped about a month ago, a significant number of consumers have complained to Amazon about the performance of their devices, and some have returned the new gadget because they were so unhappy with it, the report said.
Amazon doesn't disclose its sales or return numbers for the Fire, or any other Kindle devices, but reviews (myself included) did have a number of performance complaints with the 7-inch tablet. However, research groups have estimated that already, the Kindle Fire is the second-best selling tablet in the U.S.
The report also echoes the rumors that Amazon is working on a new Kindle Fire, possibly with a larger screen size, that could launch in the spring.
European Union antitrust regulators are investigating Apple Inc. and the e-book business model it uses to sell digital titles from five of the largest international book publishers.
Officials from the European Commission said Tuesday they were looking into the fairness of e-book sales agreements made by French publisher Hachette Livre, News Corp.-owned Harper Collins, CBS' Simon & Schuster, Britain-based Pearson Group's Penguin and the German-owned Macmillan.
In 2010 these companies switched en masse to a new pricing system for e-books, called the "agency model," in which publishers wrested away from retailers the ability to set prices. Before the agency model, e-book sellers such as Amazon.com Inc. sold e-books at any price they liked, much like bricks-and-mortar bookstores. (Once bookstores have purchased books from wholesalers, they can discount or mark up the prices at will.)
In the same way, before the agency model Amazon -- then the only major player in e-books sales -- was free to set its own prices. The company used that freedom to price its Kindle books at $9.99, a price so low that the company was generally thought to be losing money on most Kindle book sales -- in the name of attracting a large group of Kindle book buyers who would be drawn to the low and consistent pricing.
But publishers did not want Amazon's cut-rate e-book sales to give the Seattle company total control of the e-book market, especially by getting customers used to buying e-books for less than the industry believed they were worth. So, at around the time when Apple's iPad debuted, the five publishers agreed to a model in which they alone could decide book prices, and booksellers such as Apple and Amazon would receive a fixed commission on each sale.
Not long after, e-book prices began to rise. At Amazon, many bestselling Kindle e-books are now priced above $9.99. For instance, only five of Amazon's 20 "best" Kindle books of the year are below $10.
That price increase may in part be what antitrust regulators are looking into. In March, EU officials raided a number of publishers, reportedly seizing contracts and executives' smartphones and computers.
"The Commission will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition," the group's statement on Tuesday said.
The Kobo Vox tablet feels like a missed opportunity.
Over the last year, the scrappy Canadian e-reading company has released the impressive Kobo Touch eInk eReader and polished its Kobo Reading Life apps into worthy rivals to Amazon's Kindle apps and Barnes & Noble's Nook apps on tablets and smart phones.
The company is in the process of being purchased by Japan's equivalent to Amazon, the massive online retailer Rakuten. Despite Kobo's largest U.S. retail partner, Borders, closing its doors, it seemed that Kobo was akin to a promising, aspiring prizefighter on the brink of being ready to challenge the heavyweight champs of e-reading, Amazon and Barnes & Noble.
And then I used the Vox -- Kobo's answer to Amazon's Kindle Fire and Barnes & Noble's one-two punch of the Nook Color and Nook Tablet.
With the Vox, Kobo has taken a step back, delivering a product that doesn't come close to its rivals and one that doesn't match up to the quality I expected given how much I like the Kobo Touch and Kobo reading apps on Google's Android and Apple's iOS devices.
On paper, the Vox looked like a smart move, selling for $199.99 and featuring a seven-inch touch-screen with eight gigabytes of built-in storage -- that's the same included storage and price as the Fire and the same as the Nook Color (the Nook Tablet sells for $249). Just as the Nook Color and Nook Tablet do, the Vox features with a MicroSD card slot, which can accommodate a card of up to 32-gigabytes in size, if you don't mind buying one.
Like the Fire and the Nook, the Vox runs a modified version of the Android Gingerbread operating system, designed by Google with phones, not tablets in mind.
But unlike those two others, Kobo has only made minimal changes to Gingerbread, most noticeably pinning reading-related functions to the bottom of the Vox's Android home screens.
I was hopeful Kobo would deliver a competitive product, but instead I found myself disappointed at just about every turn in using the Vox.
The hardware, from the outside, isn't bad looking. The back of the Vox is great to hold on to, with Kobo's signature quilted pattern rendered in a soft and grippy plastic. On the review unit I tested, a light-blue rim of plastic sat between the back of the Kobo and its 1020 x 600 pixel resolution display.
It's nice to see a company take a bit of risk design-wise, especially when compared with the boring looks of the Kindle Fire. The Vox is also offered with lime-green, pink and black rims.
But once I turned on the device, it was mostly downhill.
The Vox starts up slow, and I failed to ever reach the seven-hour battery life Kobo claims for the Vox. I usually got about four or five hours of battery life, but there were about four times in my week of testing that the device would shut itself off when falling below an 80% charge (a couple of those delays struck when we were shooting the above video).
When the Vox was up and running, it did so sluggishly. Loading apps, menus, Web pages; checking email; opening e-books; turning pages in e-books -- everything took place slowly. It felt as though the Vox was always a step, or a second or two, behind my touch input. The display also fails to match the clarity, brightness, color range or viewing angles of the Fire and the Nook Tablet.
Snappy, speedy, responsive -- these are not words I would use to describe the Vox. Too often I found myself staring at a rotating gray circle waiting for something to load. This complaint can partly be attributed to lower-end internal specs, such as an 800-megahertz processor and 512-megabytes of RAM, but if tuned enough with the right software, such hardware shouldn't be so slow.