Amazon rebounded from a disappointing first quarter with second-quarter results that exceeded expectations — despite an earnings decline.
Net income decreased 8 percent to $191 million in the second quarter, compared with net income of $207 million in second quarter 2010. Still, expectations had been very low, meaning that the earnings per share came in 21 percent higher than expected.
Investors seemed to focus more on the sales side, where the online giant generated $9.91 billion in revenue during the period — a 51 percent gain from the comparable period in 2010. Those numbers helped boost the Seattle-based company's shares almost 6 percent in after-hours trading.
“Low prices, expanding selection, fast delivery and innovation are driving the fastest growth we’ve seen in over a decade," Amazon CEO Jeff Bezos said in a statement.
In Tuesday's earnings call, CFO Thomas Szkutak said the company's rapid growth is product of various forces building on each other over years. However, underlying this is an concentration on constantly pushing forward.
One such example is the Kindle, particularly the 3G version, which also reflects the company's emphasis on fast delivery and innovation. Sales of the Kindle 3G were up from the previous quarter, and it is now Amazon’s bestselling Kindle.
As the Kindle continues to attract new fans, questions remain about when Bezos will get into the tablet business. Bundling a tablet with streaming service Amazon Prime could enable Amazon to challenge Netflix in the streaming market if the Seattle-based company locks up enough content.
Rumors are that Amazon will launch it in the fall. With projections for the third quarter already raised, the introduction of a tablet could send them even higher.
The company's third-quarter guidance projected sales to settle between $10.3 and $11.1 billion (up 36 percent to 47 percent from last year) and operating income to settle between $20 and $170 million range (a decline of 93% to 37%).
Szkutak refused to answer questions about one subject that threatens to hurt Amazon's relationship with its customers — sales taxes.
Six states have already passed laws compelling online retailers to charge customers sales taxes if they have a physical presence in that state. California is threatening to be the seventh and Amazon has filed a petition to have a referendum on the measure. The company's fear is that such a law would inhibit Amazon's efforts to remain price competitive.