Amazon shares rise after operating loss lower than expected

Broad Investment

Fourth-quarter operating income will range from a loss of $490 million to a profit of $310 million, compared with analysts’ projections for $354.1 million in profit. Sales will be $20.3 billion to $22.8 billion, while the average estimate is $22.8 billion.

Amazon is investing across the company to support a larger volume of products sold on its site, Tom Szkutak, Amazon’s chief financial officer, said on a call. That includes technology, such as the new Kindle devices it rolled out last month, and content deals -- like the one with pay-television channel Epix in September -- for its streaming video service. Fulfillment and server maintenance for its Web services business are also factors, he said.

“Those fulfillment centers don’t have the productivity until sometime in the future,” he said. “Two of the primary drivers of both are capacity-related. We’re adding a lot of infrastructure-related costs -- our fast-growing web services business, also to support the growth of our retail business.”

‘Lowest Margin’

The company boosted spending on technology and content by 55 percent.

Amazon has reported an operating margin of less than 2 percent for the last five quarters, according to data compiled by Bloomberg. The company is valued at 254.5 times earnings, the highest of any in the Standard and Poor’s 500 Index, the data show.

“Amazon has the lowest operating margin and the highest valuation in our technology company coverage,” Colin Gillis, an analyst at BGC Partners LP in New York, said in a note to clients yesterday. “The company is not likely to achieve material leverage off its revenue growth as costs associated with investments into its digital platforms build.”

Amazon unveiled a line of bigger and faster Kindles that range in price from a $69 ad-supported reader to the $599 top- of-the-line Kindle Fire HD tablet. The new devices are competing in a tablet market expected to reach $63.2 billion this year, according to researcher NPD DisplaySearch.

The e-commerce company is facing escalating competition from competing devices. Google Inc. announced the Nexus 7 in June, Apple Inc. unveiled the iPad mini, a tablet with a 7.9- inch screen, this week, and Microsoft Corp. began selling its Surface tablet yesterday.

Bloomberg News

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