Amazon.com and its Web Services unit grew in the fourth quarter of 2013 but not enough to please investors -- Amazon stock dropped 9.5%.
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Amazon reported its fourth-quarter results Thursday. Even though revenue grew 20% from a year earlier to $25.59 billion, its stock slumped in trading after the announcement.
Net income more than doubled to $239 million, or 51 cents per share, during the key holiday shopping quarter of October-December. The Wall Street analyst consensus in advance of the report had pegged earnings 74 cents per share on revenue of $26.05 billion.
The results appeared to trigger disappointment in Amazon investors, even though full-year revenue grew 22% to $74.45 billion. Operating costs grew at a slower rate of 10%, but Amazon's spending on its business went from $676 million in 2012 to $745 million in 2013. Amazon stock fell 9.5% in the aftermath of the announcement from its close of $403.01 the day before to $364.58.
To boost cashflow, Amazon is reportedly considering raising the price of Prime customer membership ($79 a year) by $20 or more. Prime customers get free shipping and other benefits. Comments left at some blogs worried that such a move would cost Amazon customers, but a minority maintained that Amazon has developed enough stickiness that it would be hard for Prime subscribers to give up their benefits because of a small price increase.
Amazon Web Services turned in a solid quarter. "Other" revenue (which is believed to be largely AWS), nearly doubled in 2013 over 2012 to $3.2 billion.
Jillian Mirani and Michael Barba, cloud practice analysts at Technology Business Research, wrote in a note that Amazon is "successfully executing" its strategy of taking marketshare as a public infrastructure service provider to the enterprise market. It is doing so by repeatedly adding to its technology stack with such things as Amazon Workspaces or cloud-based end-user virtual desktops, tools for application development, and value-added database systems.
On Feb. 1, AWS will cut prices for the 40th time since launching EC2 in 2006. It will drop Elastic Block Store pricing by 50%, and several server instance prices will be cut an average of 14%. Amazon is the market leader in the segment, according to Gartner. CEO Jeff Bezos seems determined to keep it that way, despite the parent company's thin margins.
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Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive ... View Full Bio
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