SEATTLE — Amazon.com Inc.'s (AMZN) shares tumbled more than 12 percent Wednesday after the Internet retailer startled Wall Street with a soft sales outlook
for the holiday shopping season.
In a report after
the markets closed Tuesday, the Seattle-based company said its net income fell to $30 million, or 7 cents a share, for the
three months ended Sept. 30, from $54 million, or 13 cents a share, a year earlier.
The income slump
came despite a rise in revenue. The company said net sales increased to $1.86 billion in the third quarter, up 27 percent
from $1.46 billion last year.
But Amazon also
said it is projecting sales of $2.86 billion to $3.16 billion for the quarter ending Dec. 31. The mean estimate, $3.01 billion,
falls below the average Wall Street estimate of $3.08 billion in revenue at a time when Americans traditionally flood stores
for Christmas gift buying. Of 13 analysts polled by Thomson Financial, the lowest estimate was for fourth-quarter sales of
Its shares fell
$5.59, or 12.1 percent, to $40.58 on the Nasdaq Stock Market (search).
Excluding an unanticipated
one-time $40 million legal charge in the third quarter, Amazon said its net income would have been $50 million, or 12 cents
per share. Analysts polled by Thomson had expected 10 cents per share on revenue of $1.84 billion.
In August, Amazon
announced it would pay $40 million to Soverain Software LLC to settle a patent-infringement lawsuit. Chicago-based Soverain
had alleged that Amazon's Web site infringed several Soverain patents on network sales systems and Internet server access
control and monitoring systems.
Sales in the United States and Canada jumped to $1.04 billion, up 28 percent from $816 million in the same period last year. International
sales rose to $817 million, up 26 percent from third quarter 2004 sales of $647 million.
general merchandise sales were brisk, growing 43 percent worldwide to $491 million, up from $344 million last year.
Books, music and
other products in the media category still make up the bulk of the company's revenue. Media sales rose 20 percent to $1.31
billion, up from $1.09 billion last year.
Amazon said it sold
more than 1.6 million copies of the latest Harry Potter edition, making it the company's biggest new product release.
For the full year,
Amazon is predicting sales of $8.37 billion to $8.67 billion.
The company did
not offer any guidance for fiscal 2006, but said it plans to spend more money hiring software engineers and on other technology
"This is something
that keeps increasing," Piper Jaffray analyst Safa Rashtchy said, noting that the company's technology and content expenses
are approaching 6 percent of total revenue — nearly three times what it spent a few years ago.
In a conference
call with analysts, Jeff Bezos (search), Amazon's founder and CEO, and Tom Szkutak, chief financial officer, said the company believes its growing investment in
technology will ultimately improve shareholder returns — even though it will likely take time for it to pay off.
Bezos and Szkutak
said they remain pleased with Amazon Prime (search), a $79-a-year service that gives people unlimited two-day shipping. "Customers like it. The prime members that are subscribers
are buying more, they're doing more cross-shopping," Szkutak said, especially in electronics, tools, kitchen supplies and
health and personal care products.
The company did
not disclose how many customers have signed up for it or how much money Amazon Prime has brought in since it debuted in February.
Amazon.com started out as a virtual book store 10 years ago, and is now the
world's largest online retailer, selling everything from brake repair tools to belly rings.
Circuit City COO Quits; Amazon.com Ties Cut
February 28, 2005
NEW YORK — Circuit
City Stores Inc. (CC), the No. 2 U.S. electronics chain, Monday said its chief operating officer, John Froman, is resigning, effective March 1,
and it has not yet named a successor.
The Richmond, Va.-based
retailer also announced that it severed ties with online retailer Amazon.com Inc. (AMZN) because of the growth of its recently redesigned online store, www.circuitcity.com.
An analyst at RBC
Capital Markets, Scot Ciccarelli, said Froman's departure could mark a start of a shake-up aimed at putting the retailer back
on a growth path.
The departure of
Froman, who is also executive vice president, comes as CircuitCity weighs a $3.25 billion takeover bid from Highfields
Capital Management LP (search). When it unveiled its bid earlier this month, the private investment firm -- which already owns 6.7 percent of CircuitCity
stock -- had criticized the company for failing to take decisive steps to Froman, 51, was appointed COO in November 2001 and
was responsible for all store operations, real estate, construction, service and distribution, accordingto CircuitCity.
The board, Ciccarelli
said, has probably made a decision to accelerate any organizational changes it may have been contemplating stem a market shareslide.
"I'd be surprised
if there weren't more changes to occur," he said. He rates CircuitCity shares "neutral."
CircuitCity, with more than 600 stores, is grappling with stiff competitionfrom
top rival Best Buy Co. Inc. (BB), and others, who now include giant discounters like Wal-Mart Stores Inc..
Analysts have often
cited factors including poor locations as causes for more than four years of poor sales and inconsistent earnings growth at
Its spokesman, Bill
Cimino, said the company expected to announce Froman's successor shortly "but it won't be today."
an analyst at Fulcrum Global Partners said Froman's resignation was no surprise. She said CircuitCity
had a few internal candidateswho could succeed Froman, who probably felt sidelined after being passed over inseveral executive
promotions at the retailer recently.
Froman could not
immediately be reached for comment.
Earlier this month
CircuitCity promoted former Best Buy executive Philip Schoonover to president, from a prior role of executive
vice president and chiefmerchandising officer.
joined CircuitCity in October 2004. Before his promotion hewas responsible for the merchandising buying group, supply
chain, business development and strategy groups.
"I really don't
know if he'll succeed Froman, but it's a possibility," said Widlitz.
Commenting on the
scrapping of Amazon.com pact, she said CircuitCity probably felt it now had the technology and the brand
to sell on the Internet byitself.
CircuitCity and Amazon signed an agreement in August 2001 that enabled CircuitCity
to sell music stereos, DVD players and offer services, including in-store product
pickup, to Amazon.com customers.
Before , CircuitCity shares slipped by 15 cents, to $15.57, on the New York
Stock Exchange. Shares of Best Buy, meanwhile, jumped more than 4 percent, or $2.50, to $54.20, after JP Morgan upgraded the
stock to "overweight."
Apple iPod's Amazing Video Feat
Wednesday, October 26, 2005
By Lance Ulanoff
Take Steve Jobs (please!). Even when he comes late to market with a product, he claims
he invented it.
The other day I
was listening to Jobs spout on CNBC about how, unlike case with the portable music market (which he's willing to admit he
didn't create but merely "revolutionized" with the iPod), there is no portable-video-player market.
So Apple, he said,
with its new video-capable iPod 30GB is, more or less, inventing the market, and now he's going to see what happens.
Golly, I guess Jobs
missed the memo about portable media centers (search).
Roughly a year ago,
Microsoft and its partners rolled out a new operating system and series of handheld devices that could play music and display
photos and video (TV and full-length movies).
The products were
billed as the ultimate portable media devices — go-anywhere, do-anything consumer electronics wonders. The Creative Zen, easily the best of the bunch, was a slick-looking black unit that offered a brilliant and fairly large (for a handheld device)
Despite the efforts
by Creative, Microsoft, and Samsung, not to mention Sony with its portable PlayStation (PSP) and a slew of no-brand Taiwan-made devices, Jobs may be right.
There is no portable-video
market. All the initial hoopla and the subsequent release of players from Archos, Yepp, and others was followed by general
consumer disinterest. Almost a year later, virtually no one is carrying the gadgets — a far different scenario than
with MP3 players (search).
What went wrong?
And how are Jobs and the new iPod 30GB with video and iTunes 6.0 about to resurrect this stagnant market?
People did buy the
first round of portable media players. Around 150,000 units shipped in 2004, according to the market research firm IDC, which
expects that number to more than double for this year. But that amount,
IDC's Joshua Martin
told me, is roughly one-tenth the number of MP3 players shipped in the same time frame.
I have many theories
about what's wrong — as does Martin.
First of all, people
understand portable music (search). As Jobs noted correctly, consumers had been carrying portable players years before Apple introduced the iPod. The only
behaviors to learn were downloading and ripping songs.
People do not necessarily
understand portable video. Also, you may watch your favorite episode of "The Odd Couple" more than once, but only as it appears
in rotation (as the network plays the entire series over and over again and eventually arrives back at episode 99).
You don't want to
see one TV episode over and over, but you do listen to a popular song more than once a week and even multiple times a day
— big difference.
And the ability
to watch video and movies on the go is not really new. We all have laptops capable of this, yet I could count on one hand
how many people I see on the train in a given month watching movies on their laptops. They prefer Solitaire (search).
Portable media centers
also had the unfortunate luck of coming out within weeks of the Sony PSP.
PMCs and PSPs share
more than just a letter: They have similar consumer-electronics styling, and you can view video on both (although Sony uses
proprietary UMD discs (search)).
But consumers have
taken to the PSP because of its core functionality — gaming. The screen is big and clear enough to make it the first
portable and immersive game experience. And the ergonomics work.
At least one reason
the PSP trumps the PMC is that people love to play games and are especially happy to play them on the road. The games provide
distractions while waiting for trains or sitting on long flights, for example. Solitaire again comes to mind.
For some reason,
watching a video on such a small screen is not as compelling. There's a big difference between passive viewing and active
and the new entrant into the portable-media market, Apple, have something important in common.
Both are marketing
mavericks. Everyone knows what an iPod is, and in the PSP's relatively short lifespan, Sony has managed to shove the game
machine into the cultural zeitgeist; it's showing up in TV, movies, and articles that aren't even about the PSP.
PMCs have not yet
had their 15 minutes of fame, and I'm not sure they ever will.
The other issue
is, of course, content.
IDC's Martin admitted
that he bought an early portable media center, but has had little use for it. There are no short clips to download, so he
leaves the device behind.
I tend to agree
with IDC that studio-created or long-form content won't be what help insure the PMC's success. If people are to start watching
video on the train, the content will have to be in short bite-size pieces.
Who really wants
to get through "Star Wars: Episode III: Revenge of the Sith" in 20-minute increments during commutes? But a 10-minute news
or weather brief? That's different.
According to Martin,
that kind of content — and even video blogs — could help transform the PMC market.
I have to say, though,
I don't get audio blogs (podcasting's precursor). And while everyone calls podcasting a big success, I wonder if the interest
in it is purely a by-product of the vast number of iPods in the field.
is remarkably bullish on the future of PMCs. The firm predicts 9 million units will ship in 2009, and Martin told me that
the second generation of PMC products (like the new Creative Zen Vision) and content announcements will transform the industry.
I disagreed with
virtually everything he said. I thought the market would die a quiet death and lead to a stinging embarrassment for Microsoft
(though not as bad as the Microsoft Bob fiasco). Then Steve Jobs made his recent announcement.
Darned if he hasn't
positioned the new iPod to be the first truly successful, broadly adopted portable media player.
It has nearly all
the right features: photo, music and video capabilities, and the ability to output video to TV. And though Jobs insists it's
still a music-first device, the new unit is thinner with a wider screen, indirectly answering complaints about the overly
large first-generation PMCs while making sure that the screen is big enough to make the video-watching experience passable.
In addition, Jobs
made two other announcements that virtually seal the deal.
During our PMC discussion,
Martin returned repeatedly to the video-content issue and then made a very interesting observation: "There is no aggregator
of this content. Apple integrated podcasts into iTunes so you can find it; video needs that, too. [I'm] not sure how —
maybe a Yahoo! — but someone has to do it to serve as that directory."
Steve Jobs might
as well have been eavesdropping on our conversation. As part of the iPod announcement, he unveiled iTunes 6, which will offer
video content, including music videos and full network shows from Disney ("Lost" and "Desperate Housewives").
This makes content
providers and media companies happy: iTunes has a huge installed base, so it's an amazingly effective distribution channel.
Assuming that iTunes
will soon aggregate downloadable video from other sources is no big leap; the company did so with podcasts and instantly legitimized
As I said, Jobs
insists that the new Apple iPod is first and foremost a music player, yet he promises it'll be the world's best portable video
player, and he has done everything to ensure that it can play video well and will have a strong content pipeline. What's more,
he has the legions of current iPod owners penciling the new iPod with video onto their holiday buying lists.
Say what you will
about Jobs' ego. I think he just saved the portable-media-center market.
SEATTLE — Microsoft Corp. is diving into the business of offering online
searches of books and other writings, and says its approach aims to avoid the legal tussles met by rival Google Inc.
software giant said Tuesday that it will sidestep hot-button copyright issues (search) for now by initially focusing mainly on books, academic materials and other publications that are in the public domain (search).
to initially work with an industry organization called the Open Content Alliance (search) to let users search about 150,000 pieces of published material. A test version of the product is promised for next year.
The alliance, whose
participants also include top Internet portal Yahoo Inc., is working to make books and other offline content available online
without raising the ire of publishers and authors.
a general manager of search content acquisition with Microsoft's MSN online unit, said the company also is working with publishers and libraries on ways to eventually make
more copyright material available for online searches.
She said Microsoft
is looking at several options, including models where users would be charged to access the content.
Microsoft said it
has no plans right now to have targeted ads located in the search results, but the company cautioned that it was still working
out the details of its business model.
"I think about the
150,000 books as a test," Tiedt said.
Rival Google has
taken a markedly different approach, with plans to index millions of copyright books from three major university libraries
— Harvard, Stanford and Michigan
— unless the copyright holder notifies the company which volumes should be excluded.
of American Publishers (search), representing five publishers, and The Authors Guild (search), which includes about 8,000 writers, have both sued the search engine giant over the plans.
Google has defended
the effort as necessary to its goal of helping people find information — and insists that its scanning effort is protected
under fair use law because of restrictions placed on how much of any single book could be read.
Responding to Microsoft's
plans to offer its own book search, Google said in a statement that it "welcomes efforts to make information accessible to
Tiedt said Microsoft
is coming at book search from a different angle in part because the software maker itself is so often the target of copyright
infringement. Pirated versions of Microsoft's Windows operating system are widely available in developing countries for only
a few dollars.
has the potential to backfire, however, if Google ends up having more content available or begins offering ways to search
content for free while Microsoft pursues a model that requires people to pay for it.
it is far behind Google.
Tiedt said she expects
it will take years — and require a substantial investment — to solidify the MSN product, working out all the complex issues around searching through books and other materials
"This is not a money-maker
for the company," Tiedt said. "This is very much a strategic bet for search overall."
The effort marks
Microsoft's latest effort to play catch-up with Google on various search technologies ranging from basic Internet search to
But Google remains
by the search leader by far, accounting for 45.1 percent of all U.S. Internet searches in September, according to Nielsen/Net
Ratings. Microsoft's MSN Search ranked third, accounting for 11.7 percent of U.S. searches during the same period.
Publishers Sue Google Over Book-Scanning Scheme
October 19, 2005
NEW YORK — Just
weeks after a leading authors' organization sued Google for copyright infringement, the Association of American Publishers
(search) has also filed suit against the search engine giant's plans to scan and index books for the Internet.
Under the Google
Print Library Project (search), millions of copyrighted books from three major university libraries — Harvard, Stanford and Michigan — will be indexed on the Internet unless the copyright holder
notifies the company by Nov. 1 about which volumes should be excluded.
Google has called
the project an invaluable chance for books to receive increased exposure.
But in papers filed
Wednesday in the U.S. District Court in Manhattan, the publishers association sought a permanent injunction and cited the
"continuing, irreparable and imminent harm publishers are suffering ... due to Google's willful [copyright] infringement to
further its own commercial purposes."
The suit was filed
on behalf of five publishers: McGraw-Hill (search), Pearson Education (search), Penguin Group USA (search), Simon & Schuster (search) and John Wiley & Sons (search). The suit seeks recovery of legal costs, but no additional damages.
Google, in a statement
issued Wednesday, called the legal action "short-sighted" and said the project was a "historic effort to make millions of
books easier for people to find and buy."
Google's general counsel and vice president of corporate development, said in the statement that "creating an easy to use
index of books is fair use under copyright law and supports the purpose of copyright: to increase the awareness and sales
of books directly benefiting copyright holders."