Amazon sees profits plummet 73% as company eyes iPad’s market share

Kathleen Hall

Kathleen Hall is correspondent for Computer Weekly. She writes about technology issues in small to medium-sized enterprises, as well as specialising in the retail and services sectors.

Previously Kathleen worked as business reporter for Vitesse Media, covering SMEs and enterprise IT. 

Follow her on Twitter @KatHallCW

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Amazon's profits plunged 73% to $63m in its third quarter results, as the company invests heavily to take on the iPad with its cut-price range of e-readers and Kindle Fire tablet computer.

Sales grew by 44% to $10.88bn in the third quarter, boosted by the new generation of Kindle book readers and pre-orders for the Amazon Kindle Fire.

Jeff Bezos, the founder and chief executive of Amazon, said: "In the three weeks since launch, orders for electronic ink Kindles are double the previous launch. And based on what we're seeing with Kindle Fire pre-orders, we're increasing capacity and building millions more than we'd already planned."

But for the fourth quarter the company said it may make a lot with profits expected to fall between 142% and 47%. Sales are expected to grow between 27% and 44% compared with fourth quarter 2010, reaching up to $18.65bn.

Richard Holway, co-founder of analyst company TechMarketView, said the company's decline in profits were due to it concentrating on market share. "In particular Amazon are prepared to sell its Kindle range - and this probably includes the Fire too - at a loss. On top of that Amazon is investing heavily to physical distribution centres - 17 new ones recently. Indeed another 3 in the UK creating thousands of new jobs," he said.

Holway added that this could be a successful strategy. "Sometimes it is right to invest for the future rather than just concentrate on profits today," he said.

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