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Amazon posts just $7m profit on $12.8bn in sales

Burns through the cash
Fri Jul 27 2012, 13:16
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ONLINE RETAILER Amazon squeaked in a $7m profit despite posting sales of $12.8bn in its second quarter.

Amazon, which has been trying its hand as an online infrastructure provider, saw overall sales grow by an impressive 29 per cent to $12.8bn from the same quarter a year ago. However the firm wasn't able to convert that revenue into profit, managing to take home just $7m, a 96 per cent drop from the same period in 2011.

Another worrying development for Amazon is the rate at which the firm is burning through its cash. According to the company's balance sheet, at the end of 2011 it had just over $5.2bn in cash and cash equivalents - short term investments that can be turned into cash quickly - but by 30 June 2012 the firm reported that this figure had shrunk to $2.3bn.

While Amazon's sales are showing impressive growth the inability of the firm to turn sales into cold hard cash is concerning. Jeff Bezos, CEO of Amazon didn't provide any comments on the results but decided to say, "Amazon Prime is now the best bargain in the history of shopping - that is not hyperbole."

Amazon's push into cloud services sounds very reasonable given that the firm has shown it can't make a significant profit after shifting over $10bn worth of items through its online store. While the company was one of the first into the online shopping market, in the cloud service market it is going up against entrenched rivals such as IBM, HP, Apple, Google and Microsoft, so Amazon's $2.3bn cash balance might come down further. µ

 

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