Amazon is Losing Money Trying to Compete With Apple

Amazon.com (NASDAQ:AMZN) released its earnings yesterday, and the results suggest that the company is spending a lot of money developing and marketing its new Kindle Fire tablet.  Amazon is looking to compete with Apple‘s (NASDAQ:AAPL) iPad.

The company reported net income of $63 million, or $0.14 per share.  A year ago, the company earned $231 million, or $0.51 per share.  This quarters earnings missed analysts’ expectations of $0.24 per share.

Amazon.com Inc. Earnings Cheat Sheet: Bad Luck Continues>>

Amazon forecast that its operating results in the next quarter would range from a loss of $200 million to a profit of $250 million.

A quick look at Amazon’s balance sheet suggests that its cash position is not as good as Apple’s.  The company holds $6.3 billion in cash and short term investments as of 6/30/11, against $8 billion in current liabilities.  That leaves it little room to maneuver as it tried to position its Kindle Fire as an iPad killer.  The company does have about $5 billion in other current assets which it could liquidate if it were to face a cash crunch, but this obviously is not an ideal path to take.  Its operating cash flow does not look good either.  Operating cash flow in the quarter ended 6/30/11 was ($1,163 billion).  All told, the company recorded a net change in cash of ($1.73 billion) in the quarter ended 6/30/11.

Following is some information on Amazon.com’s stock price performance, as well as that of Apple.

  • Amazon.com Inc. (NASDAQ:AMZN): The shares recently traded at $200.45, down 426.70, or 11.75%, on the day.  The shares have traded in a 52-week range of $156.77 to $246.71 and its market capitalization is $90.99 billion.  About the company: Amazon.com, Inc. is an online retailer that offers a wide range of products.  The Company’s products include books, music, videotape, computers, electronics, home and garden, and numerous other products.  Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers.
  • Apple, Inc. (NASDAQ:AAPL): The shares recently traded at $394.94, down $2.83, or 0.71%, on the day.  The shares have traded in a 52-week range of $297.76 billion to $426.70 billion and its market capitalization is $367.06 billion.   About the company: Apple, Inc. designs, manufactures, and markets personal computers and related personal computing and mobile communication devices along with a variety of related software, services, peripherals, and networking solutions.  The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, third-party wholesalers, and resellers.

(Note: Selected financial data are sourced from Google Finance.  All data are assumed to be accurate.)

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