[LINK] amazon, the economy and the cost of those gadgets

Jan Whitaker jwhit at janwhitaker.com
Sat Apr 25 09:52:34 AEST 2009

I thought I'd pass this along because of the gadgets part.

 From Publishers Lunch daily email, so I can't give you a link for my 
source, just the embedded one at the end.

>Amazon Continues Growth, But Media Sales Lag
>Overall sales for the first quarter at Amazon.com increased by 18 
>percent to $4.89 billion, as operating income increased 23 percent 
>to $244 million in the first quarter, and net income rose 24 percent 
>to $177 million.
>But the growth was driven heavily by electronics, as the media 
>segment--which includes books and digital downloads among other 
>items--continues to lag the company's overall performance. North 
>American media sales of $1.305 billion were up 8 percent compared to 
>a year ago (similar to the rise in the previous quarter), while 
>international media sales of $1.418 billion were up just six 
>percent, held back by foreign exchange. Take out roughly $35 million 
>for the Audible acquisition and "like-for-like" North American media 
>growth slides to just 5.4 percent.
>Amazon continues to feed analysts' fantasies by exclaiming, as ceo 
>Jeff Bezos wrote recently in a shareholders letter, "that Kindle 
>sales have exceeded our most optimistic expectations." Be that as it 
>may, either Kindle still isn't translating to significant dollars 
>for the company, or its addition is masking even more greater 
>weakness (and possible declines) within the media segment, or 
>possible holding back sales by cannibalizing more expensive print 
>products with subsidized Kindle downloads. (Best guesses put 
>quarterly sales of Kindle downloads at $20 million to $30 million. 
>Device sales revenues are amortized over a two-year period so they 
>are not clearly evident in the company's results, and it's also not 
>clear whether they are booked as "media," "electronics," or "other.")
>On Wednesday iSuppli put out a 
>release saying they had calculated that price of the raw components 
>that comprise the Kindle 2 as approximately $185 dollars, with the 
>e-ink screen ($60) and wireless communication module ($40) the two 
>most expensive parts. In a rare comment, cfo Thomas Szkutak insisted 
>in a conference call including a 
>reporter that "the production cost was significantly higher than 
>that." And that does not include allowances for wireless 
>communication costs, packaging, freight, customer service, 
>technology/development, advertising/promotion and many other costs 
>(never mind the opportunity cost of the prominent site home page 
>space given to Kindle over any other product offering, and the small 
>loss per unit takes on new and bestselling Kindle books sold below 
>actual publisher wholesale cost).
>For comparison, the AP says Apple's iPhone 3G costs $174 to build 
>and lists for $599 to $699 without a service contract. (Amazon's 
>gross margin across North American sales was 26.9 percent.)

Melbourne, Victoria, Australia
jwhit at janwhitaker.com
blog: http://janwhitaker.com/jansblog/
business: http://www.janwhitaker.com

Our truest response to the irrationality of the world is to paint or 
sing or write, for only in such response do we find truth.
~Madeline L'Engle, writer

_ __________________ _

More information about the Link mailing list