Amazon Misses; Q4 Net Income Down 58 Percent To $177M; Sales Up 35 Percent

Amazon has just released fourth quarter 2011 earnings, missing sales expectations but beating earnings estimates. Net income decreased 58% to $177 million in the fourth quarter, or $0.38 per diluted share, compared with net income of $416 million, or $0.91 per diluted share, in fourth quarter 2010. Net sales increased 35% to $17.43 billion in the fourth quarter, compared with $12.95 billion in fourth quarter 2010. Analysts are expecting earnings of $0.17 cents a share on revenue of about $18.3 billion.

“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe,” said Amazon CEO and founder Jeff Bezos. “Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold.”

Operating income was $260 million in the fourth quarter, compared with $474 million in fourth quarter 2010. Operating cash flow increased 12% to $3.9 billion for 2011 compared with $3.5 billion in 2010. Free cash flow decreased 17% to $2.09 billion in 2011, compared with $2.52 billion in 2010.

Full year 2011 sales increased 41% to $48.08 billion, compared with $34.20 billion in 2010.

North America sales were $9.9 billion, up 37% from fourth quarter 2010. International sales, representing the company’s U.K., German, Japanese, French, Chinese, Italian and Spanish sites, were $7.53 billion, up 31% from fourth quarter 2010.

Worldwide Media sales grew 15% to $6.01 billion. Worldwide Electronics and Other General Merchandise sales grew 48% to $10.91 billion.

Amazon says its Appstore for Android customers nearly tripled in the fourth quarter compared to the third quarter. In addition, customers downloaded more apps from the Amazon Appstore during the fourth quarter than they had during all previous quarters combined. Amazon also said the number of videos purchased or rented from Amazon Instant Video and the number of Amazon Instant Video customers both more than doubled year-over-year in the fourth quarter. In addition, the number of Prime Instant Video streams increased nearly 300% in the fourth quarter compared to the third quarter.

All signs point to the Kindle Fire selling very well. One analyst recently updated Q4 Fire sales to six million units from five million. Amazon said that Kindle device sales as a whole tripled over the holidays.

Amazon has also been rumored to be taking on Netflix with with a more comprehensive video-streaming product.