Amazon profits crumble after heavy Kindle investment

Amazon’s profits have dropped by 73% in its third quarter, with the company's investment in its Kindle e-readers blamed for the slump.

In the three months to 30th September, net income fell from $231m (£144.4m) to $63m (£39.4m) year on year. Sales rose by 44% to $10.88bn (£6.8bn), in comparison to $7.56bn (£4.7bn) in 2010. In its international arm, including sites in the UK, Germany, Japan, France, China, Italy and Spain, the company reported sales were $4.94bn (£3.1bn), up 44% from third quarter 2010.

Following the release of the financial results, shares in Amazon fell 14.25% to $194.77 (£121.75). Analysts put the slump in profits down to investment in its new Kindle devices, Fire and Touch. However, Amazon was gloomy about the months ahead, suggesting it could make between a $200m (£125.0m) loss and $250m (£156.3m) profit in its fourth financial quarter.

Evercore Partners analyst Ken Sena told Reuters: "We're not seeing the investment pay off yet, but I think investors are impatient as to how long will it take before you will start to see this pay off." He added, "When are we going to start to see some signs?"

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