Is Apple to Blame for Amazon’s Earnings Miss?
Amazon’s (NASDAQ:AMZN) price war with Apple (NASDAQ:AAPL) is starting to affect their bottom line as the Seattle-based company predicts as much as a $200 million fourth quarter loss. The announcement has prompted investors to re-price the company down nearly $11 billion. Amazon (NASDAQ:AMZN) is trying to compete with Apple (NASDAQ:AAPL) in the arenas of tablet computers and media sales.
Amazon (NASDAQ:AMZN) is currently pricing the Kindle Fire at $199, less than half the cost of an Apple (NASDAQ:AAPL) iPad. Colin Sebastian, an analyst at Robert W. Baird & Co. says, “Competing with Apple (NASDAQ:AAPL) isn’t easy. It comes at a cost, but the traditional media business they have would wilt on the vine without Amazon (NASDAQ:AMZN) making this transition to digital,” quotes Bloomberg.
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According to Wall St. Watchdog, “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.”
Amazon (NASDAQ:AMZN) stock is down 11.62% today to a price of $200.73 per share. Shares are down 14.49% in the last year with a 52-week range of $156.77 to $246.71.
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