Is Apple Starting to Take a Bite Out of Amazon?

Amazon (NASDAQ:AMZN) today announced financial results for its first quarter ended March 31, 2010. Although the iPad was not yet released, pre-orders were available. I think the Kindle looks like an old piece of crap next to an iPad. Seems like investors agree with the stock down 10% after hours.

Operating cash flow was $2.78 billion for the trailing twelve months, compared with $1.76billion for the trailing twelve months ended March 31, 2009. Free cash flow increased 62% to $2.32 billion for the trailing twelve months, compared with $1.43 billion for the trailing twelve months ended March 31, 2009.

Common shares outstanding plus shares underlying stock-based awards totaled 463 million on March 31, 2010, compared with 447 million a year ago.

Net sales increased 46% to $7.13 billion in the first quarter, compared with $4.89 billion in first quarter 2009. Excluding the $185 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 42% compared with first quarter 2009.

Operating income increased 62% to $394 million in the first quarter, compared with $244 million in first quarter 2009. Excluding the $15 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income would have grown 56% compared with first quarter 2009.

Net income increased 68% to $299 million in the first quarter, or $0.66 per diluted share, compared with net income of $177 million, or $0.41 per diluted share, in first quarter 2009.

“We remain heads-down focused on customers,” said Jeff Bezos, founder and CEO of Amazon.com. “Amazon Prime has just celebrated its fifth anniversary, adoption of Amazon Web Services continues to accelerate, Kindle remains our #1 bestselling product, and earlier this week, Kindle selection reached 500,000 titles.”

Highlights

  • North America segment sales, representing the Company’s U.S. and Canadian sites, were $3.78 billion, up 47% from first quarter 2009.
  • International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $3.35 billion, up 45% from first quarter 2009. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 37%.
  • Worldwide Media sales grew 26% to $3.43 billion. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 22%.
  • Worldwide Electronics & Other General Merchandise sales grew 72% to $3.51 billion. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 68%.
  • Amazon Prime, a program that allows customers to take advantage of unlimited expedited shipping for a low annual fee, celebrated its fifth anniversary. In the last five years, we have introduced Amazon Prime to customers in the U.S., Japan, the United Kingdom, Germany, and France.
  • Amazon WebStore introduced new capabilities and a self-service toolset that improve flexibility and control over a Seller’s site design, branding, and catalog offering. Amazon WebStore incorporates Amazon’s expertise, and makes building and operating an eCommerce business fast, easy and low cost.
  • Amazon Web Services (AWS) introduced Amazon Simple Notification Service (Amazon SNS), a new offering that provides developers with a highly scalable, flexible, and cost-effective capability to publish messages from an application and immediately deliver them to subscribers or other applications.
  • During the quarter, AWS lowered pricing for outbound data transfer by up to 40%. By aggregating total Data Transfer Out usage across multiple services, customers can reach higher tiers and lower pricing more quickly.
  • AWS announced the availability of Reserved Instances with Windows for Amazon EC2. Customers running Windows Server can choose to pay a low, upfront fee to guarantee the right to run a compute instance at a significantly discounted hourly price.
  • The Company announced that authors and publishers around the world can now use the self-service Kindle Digital Text Platform (DTP) to upload and make available their books in Spanish, Portuguese and Italian to customers worldwide in the Kindle Store. Authors and publishers already have the ability to upload and make available their books in English, French and German.
  • The U.S. Kindle Store now has more than 500,000 books, including 100 of 111 New York Times Bestsellers, more than 9,000 blogs, and more than 175 top U.S. and International newspapers and magazines, including: The New York Times, Le Monde, USA Today, The Times (U.K.), The Economist, Fortune, Newsweek, and Time.
  • Kindle, the #1 bestselling product on Amazon, is available for immediate shipment for $259 and comes with 3G wireless with no annual contract or monthly fees. Kindle weighs only 10.2 ounces and reads like real paper without glare – even in bright sunlight.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of April 22, 2010. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce and the various factors detailed below.

Second Quarter 2010 Guidance

  • Net sales are expected to be between $6.1 billion and $6.7 billion, or to grow between 31% and 44% compared with second quarter 2009.
  • Operating income is expected to be between $220 million and $320 million, or to grow between 39% and 102% compared with second quarter 2009. The second quarter 2009 results include the impact of our settlement with Toysrus.com LLC for $51 million, substantially all of which was expensed during the quarter.
  • This guidance includes approximately $130 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.