AMAZON.COM $269.47 - Nasdaq symbol AMZN

AMAZON.COM $269.47 (Nasdaq symbol AMZN; TSINetwork Rating: Extra Risk) (206-266-1000; www.amazon.com; Shares outstanding: 454.6 million; Market cap: $122.5 billion; No dividends paid) is a major online retailer. It gets about 33% of its sales from books, music and videos. Other products, including electronics, computer games and toys, make up the other 67%. Amazon Marketplace lets other companies sell their products through Amazon’s websites.

In the three months ended December 31, 2012, Amazon’s earnings fell 45.2%, to $97.0 million, or $0.21 a share. A year earlier, it earned $177.0 million, or $0.38 a share. The profit decline came despite a 22.0% jump in sales, to $21.3 billion from $17.4 billion.

In the latest quarter, the company spent $1.3 billion on “technology and content,” up 56.0% from $862 million a year earlier. That was a major reason for the lower earnings. This additional spending included investments in new models of its Kindle reader, including the Kindle Fire tablet computer. It also invested in cloud computing services and expanded its digital content business to compete with rival Apple Inc.

In addition, Amazon made big investments to expand its network of warehouses, especially near larger centres. That also weighed on its profits.

The company faces a number of challenges that could keep its profit margins low. For example, it will have to continue spending heavily on technology to hold on to its current customers and attract new ones. At the same time, it must deal with intense competition in the e-book market from big rivals like eBay, Apple, Barnes & Noble and Google. As well, Apple still dominates the tablet market.

Amazon.com is still a hold.

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