Amazon Credits Kindle For Earnings Beat (NASDAQ:AMZN) earnings fell 35 percent in the first quarter, but still did much better than Wall Street estimates, recovering somewhat through sales of Kindle and those from outside vendors. Amazon reported a net income of $130 million, or 28 cents a share, compared to net income of $201 million, or 44 cents a share, for the same period last year. A consensus estimate by analysts had pegged earnings at 7 cents a share.

Amazon said the Kindle Fire was the bestselling item on its website, with the company shipping 4.7 million tablets in the fourth quarter. That gives it a 16.8 percent tablet market share and puts it on the top of the Google (NASDAQ:GOOG) Android-run tablet pile and behind Apple’s (NASDAQ:AAPL) iPad.

Revenue rose 34 percent to $13.18 billion, a little better than expected, compared with $9.86 billion in first quarter 2011. Operating income fell 40 percent to $192 million. Amazon has invested big in new fulfillment centers and warehouses, as well as technologies like cloud computing services, pulling down operating income.

Amazon has a business model of subsidizing prices of its hardware to forgo short-term profits with hopes of increasing its customer base, and eventually earning revenue from online content sales. The company said 9 out of 10 top sellers in the first quarter on its website were digital products, including the Kindle, Kindle books, movies, music, and apps. The company said worldwide media sales grew 19 percent to $4.71 billion.

Chief executive Jeff Bezos stressed on the company’s strategy to keep adding valuable content. “I’m excited to announce that we now have more than 130,000 new, in-copyright books that are exclusive to the Kindle Store – you won’t find them anywhere else,” Bezos said. “They include many of our top bestsellers – in fact, 16 of our top 100 bestselling titles are exclusive to our store.”

The company predicted that second-quarter operating income will range from a loss of $260 million to a gain of $40 million.

Shares of Amazon have gained 12 percent year-to-date, and surged more than 12 percent in the minutes after the earnings report was released.